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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011
EGYPTIAN EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
With the global economy on the mend, prospects
for the emerging markets have improved. Almost
every country is projected to grow faster in 2010
and 2011 than in 2009.
Given this pickup in growth, the global activity in
2010 has witnessed sustainable progress
compared to that of 2009 & 2008 and expanded
at rates of 5% derived from the growth of
emerging economies, which reported a decline of
0.6% in 2009 and a growth rate of 2.8% in 2008.
The Egyptian economy continued to grow in 2010
exceeding the expectations with a growth rate of
5.1% compared with 4.7% in 2009, with a
noticeable increase in the growth rate of the 3rd
quarter of 2010 in particular (July-Sep) reaching
to 5.5% which is the highest growth rate within
one quarter since the post- Lehman slowdown in
2008. The positive trend is expected to continue
thanks to the increasing domestic demand and
the accelerating infrastructure expenditure
through the Public- Private Partnership (PPP),
which will help mobilize the private sector
financing and the know-how.
On another hand, the significant progress made
in the wide-ranging structural reforms which was
accelerated after 2004 resulted in mobilizing the
foreign direct investments (FDI) towards the
Egyptian economy, which recorded around US$
6.8 Billion in FY 2009/10, regardless the crisis’
effect compared with US$ 8.1 Billion in FY 2008/9.
The last quarter of 2009/10 alone witnessed an
increase of 42% in the foreign investments
compared with the third one.
Moreover, the Egyptian external sector also
witnessed a significant improvement, with the
balance of payments realizing a surplus of US$
3.4 billion during the FY 2009/10 vs. a deficit of
US$ 3.4 billion during the same comparable
period of the previous year.
Meanwhile, the inflation rate depreciated from
13.5% in Dec 2009 to reach 10.2 in Nov 2010
which is the lowest level in 11 months. On the
other hand, the core inflation in November has
reached 8.9% compared to 6.9% in 2009.
However, the core inflation remains within the
central bank’s comfort zone.
From another perspective, the stability of the financial
sector in Egypt during and since the crisis is a
testament to reforms since 2004. Consequently, “The
Economist” located Egypt as one of the best
emerging markets with extensive potential growth
throughout the next decade among countries named
"CIVETS" which include Colombia, Indonesia,
Vietnam, Egypt, Turkey and South Africa.
The year 2010 should be called the “Year of
Rebuilding Trust” of Egyptian investors in the
Egyptian Capital Market. The Egyptian market has
witnessed a positive performance, ranking third
among the MENA markets, with gains exceeding
15%, together with a number of regulatory
reforms targeting the market’s efficiency and
integrity.
In 2010, an array of rules and regulation of the
capital market were revised. There has been
amendments on the listing and disclosure rules,
the Egyptian Financial Supervisory Authority
(EFSA) also reviewed the intraday trading rules
and amended the trading system of the OTC
market and restricted the trading in this market to
2 days only per week and a (T+3) settlement.
Rules regulating the branches of the brokerage
firms have been also issued. EFSA has also
approved the regulations set for the work of the
independent financial advisor to tighten
supervision on markets.
Comparing the Egyptian Exchange with the
Emerging Markets, the Egyptian Exchange was
higher than the average of the emerging markets
where it performed better than China, Brazil,
Czech, and Hungary which recorded a negative
growth in 2010., the Egyptian market recorded a
growth rate of 9% according to Morgan Stanley
Index (USD) and a 15% according to the Morgan
Stanley Index in EGP, compared with an average
of 16% of that of the emerging markets in USD.
Nevertheless, the Egyptian Exchange received
the highest foreign influx in its history with the
Non-Arab foreign investors generating net inflows
of EGP 8.4 Billion (after excluding deals).
During 2010, EGX was able to maintain relatively
high trading records, registering a trading value
of around EGP 264 Billion (after excluding deals),
which is almost the same recorded figure of the
same comparable period of last year. Additionally,
the market recorded a trading volume of around
27 billion shares, which approaches the figure
recorded during the 2009.
On the other hand, with stricter regulation on the
OTC market, where trading was restricted to two
days per week and a settlement of a T+3, the
OTC market has witnessed a decrease in the
trading volumes with a value of around EGP 48
billion, which is less than the previous year with
almost 58%. And due to the improvement in the
current economic environment, the market
witnessed 3 IPOs with a total value exceeding
EGP 2 billion; the first was initiated by Juhayna
Food Industries which was successfully covered
by 7 times and awarded as Best African IPO by
Africa Investor; the leading international
investment research and communications group.
The other two offerings were for companies in the
Pharmaceutical and Real Estate sectors.
The bond market has also recorded a remarkable
increase in trading value, locking in more than
EGP 63 Billion, accounting for almost 20% of the
trading value on EGX, as a result of the
continuous efforts to activate the debt market in
Egypt.
The Bond market has also witnessed the listing of
the first public juristic entity bond for the New
Urban Communities Authority with a value of EGP
10 Billion, following the issuance of the Ministerial
Decree Number 1 of 2010, allowing and
introducing the necessary procedures for noncorporations
to issue bonds in the Egyptian
market.
NILEX is moving forward, since commencement
of trading on 3 June 2010, boasting 16 listed
companies with a market capitalization of more
than EGP 1 Billion. The market recorded a
trading value of EGP 199 million. Additionally,
EFSA approval to raise the maximum capital of
the companies listed on NILEX to LE 50 million
from LE 25 million, which is expected to attract a
large number of promising medium & small cap
companies to get listed on NILEX.
Furthermore, committed to market integrity, EGX
partnered with MilleniumIT, to provide EGX with a
proactive, international best practice surveillance
system and fulfill the Exchange’s vision of
providing an equitable, transparent and high
quality market place.
Believing in the importance of having global
exchange's cooperation and in order to enhance
the cross border trading, EGX is in the final stage
to get connected to international markets via EGX
FIX Hub. This will enable large institutions to
access the Egyptian market directly and will
facilitate capital flow from other markets to Egypt
and vice versa besides setting EGX as the hub in
the Middle East and Africa region.
Reflecting the confidence of foreign investors in
the Egyptian market, Global Van Eck – one of the
giant financial institutions in the world - launched
the first ETF to track the Egyptian market
movement and is traded in NYSE in February
2010. Moreover, the "Royal Bank of Scotland"
issued certificates on EGX 30 Index. These
certificates were listed and traded on Milan Stock
Exchanges effective 14 June 2010.
Information obtained from the Exchange.
Key Information Contacts
Ministry of Finance www.mof.gov.eg
Ministry of Investment www.investment.gov.eg
Central Bank of Egypt www.cbe.org.eg
Egyptian Financial Supervisory Authority www.efsa.gov.eg
Misr for Clearing, Depository and Central Registry www.mcsd.com.eg
SMEs Market (NILEX) www.nilex.egyptse.com
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