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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 PAGE 62
FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011 EGYPTIAN EXCHANGE EGYPT ECONOMIC CHARTS AND TABLES 2007/2008 (b) 2008/2009 (b) GDP at market prices (LE bn) 896.5 1,038.6 GDP at market prices (US$ bn) 163 189 Real GDP growth (%) 7.2 4.7 Consumer price inflation(a,%) 11.7 16.2 Population (a, mn) 77.5 79.1 Exports of goods fob (US$ m) 29,356 25,169 Imports of goods fob (US$ m) -52,771 -50,342 Current-account balance (US$ m) 888.3 -4,424.3 Foreign-exchange reserves excl gold (a, US$ m) 34,572 31,310 Total external debt (US$ bn) 12.3 9.0 Debt-service ratio (% Current Receipts) 3.9 5.3 Exchange rate (a) E£:US$ 5.5 5.5 Actual. (b) Fiscal year data ending June 30th. Source: Central Bank of Egypt, CBE) 2008/09-PRINCIPAL EXPORTS (US$ millions) Petroleum products (inc. natural gas) 7,009 Crude oil 4,004 Iron ore, steel & products thereof 1,154 Ready-made clothes 608 Aluminum ore 396 2008/09-PRINCIPAL IMPORTS (US$ millions) Petroleum products (inc. natural gas) 4,419 Crude oil 2,613 Iron ore, steel & products thereof 4,538 Ready-made clothes 608 Aluminum ore 402 PAGE 63
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