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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 CAIRO & ALEXANDRIA STOCK EXCHANGES Mohamed Abdel Salam Chairman The Egyptian market has made its way through the economic and financial liberalization and reform process that began in the last decade. The market continues to develop and each year adds more instruments and mechanisms to support transactions, enhance efficiency, and protect market participants. Locally, 2003/2004 witnessed the appointment of a reformminded Cabinet in June that has been earnestly working to remove obstacles to investment, starting with customs and tax reforms and in parallel promoting an investment-friendly reputation and overcoming investment obstacles in Egypt by recognizing the strong potentials in the Egyptian market for local and foreign investors. The year 2003/2004 witnessed the undertaking of major projects at Cairo and Alexandria Stock Exchanges (CASE), including bringing information technology to bear in connecting the trading system in the stock exchange, the Capital Market Authority and Misr for Clearing Settlement and Depositary. HISTORY AND DEVELOPMENT The Egyptian Stock Exchange is comprised of two exchanges: the CASE, and is governed by the same board of directors that share the same trading, clearing and settlement systems. The Alexandria Stock Exchange was officially established in 1888 followed by Cairo in 1903. The two Exchanges were very active in the 1940s, when the Egyptian Stock Exchange ranked fifth in the world. Nevertheless, the central planning and socialist policies adopted in the mid-1950s led to the demise of activity on the Exchanges, which remained dormant throughout the period between 1961 and 1992. In 1990, the Egyptian government started an economic reform and restructuring program. The move toward a free-market economy has been remarkably swift and the process of deregulation and privatization has stimulated stock market activity. In mid- 1997, the Exchange started its modernization plan that included an overhaul of its trading system, listing and membership rules, OTC trading and investor education. PAGE 66 We, at CASE, are planning to introduce new market instruments like margin trading, and short selling since it represents a positive step towards the introduction of derivatives into the market. The past year also witnessed launching of the Primary Dealers System for bonds in October 2004, and the 13 banks acting as Primary Dealers have covered the three issues of treasury bonds amounting to US$ 156 million in a step forward to support the bond market, increase the number of efficient financial tools in the market, and strengthen the role of securitization in supporting the real estate market. We, at CASE, are planning to introduce new market instruments like margin trading, and short selling since it represents a positive step towards the introduction of derivatives into the market. Internationally, the government took steps toward developing an international Financial service Center in Egypt. This support begins with putting in place the necessary legislation and regulatory environment up-front to providing the necessary resources to develop the center on an on-going basis. In addition, concerning efforts pursued to attract other foreign investors, we are introducing the concept of corporate governance through one of its requirements of disclosure and transparency through CASE aims to be one of the core financial centers in the Middle East North Africa (MENA) region, through the adoption of leading-edge technology, commitment to continuous improvement in its rules and regulations, the products and services it offers, and alliances forged with international markets. CASE is striving to strengthen its competitive position by embracing a strong customer orientation, offering timely and secure services to investors, members and market participants as well as promoting the confidence and understanding of investors of its operations. In short, fairness, efficiency and transparency constitute our ongoing vision and ultimate objectives. enhancing the relationship between CASE and the other regional institutions. We, at CASE, are working on all fronts when it comes to attracting foreign investments. Some programs in particular will be used to attract investors. For example, the unified Arab Stock Exchange, which will be located in the Egyptian smart village. Based on the development needed, we can capitalize on our historical, geographical, cultural, and market knowledge to take the lead regionally. In opening our gates we are targeting bringing back the capital and investments to the region by putting together the Arab blue chip stocks to be traded in one place, strengthening the flow of capital and creating better investment opportunities for domestic and foreign investors, and enhancing the flow of information and transparency through the regional stock markets. In addition to encouraging more investment in Egypt, CASE will continue its efforts for enhancing investor education, pledging to maintain a market that is fair and trustworthy. FUTURE OUTLOOK CASE’s vision for 2005 is to become the main gateway for investment in the MENA Region while operating with the utmost fairness, efficiency and transparency. In this respect, CASE has set a three year plan. For 2005 CASE plans to: • link CASE trading system with the clearing company (Misr Clearing Settlement and Depository –MCSD) in a step towards having a straight through processing environment; • develop the Surveillance department according to international standards; • support and develop the infrastructure of the Pan Arab Stock Exchange; • re-locate the Exchange to the Smart Village, being the major component of the regional financial center; • apply Corporate governance principles within the Exchange; • introduce new products such as (margin trading and short selling – 1st Quarter 2005), (the Exchange Traded Funds – 2006 ) and (the derivatives – 2007), to increase market liquidity and turnover; and • implement e-Gov within the Exchange.
FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005 CAIRO & ALEXANDRIA STOCK EXCHANGES OFFICIAL 6 MONTH STATISTICS US$ Millions # Shares Millions Total Volume Avg. Daily Volume Total Volume Avg. Daily Volume Stocks July-04 271.9 13.6 129.2 6.5 Aug-04 428.1 18.6 146.8 6.4 Sep-04 616.2 28.0 156.0 7.1 Oct-04 380.9 19.0 82.9 4.1 Nov-04 510.3 25.5 137.7 6.9 Dec-04 702.4 31.9 174.8 7.9 TOTAL 2,909.9 22.8 827.4 6.5 Bonds July-04 0.14 0.007 0.01 0.001 Aug-04 0.10 0.004 0.005 0.0002 Sep-04 0.33 0.01 0.02 0.001 Oct-04 0.19 0.009 0.01 0.001 Nov-04 181.9 9.1 1.1 0.06 Dec-04 219.7 10.0 1.3 0.06 TOTAL 402.4 3.2 2.5 0.02 Other July-04 42.5 2.1 31.8 1.6 Aug-04 146.8 6.4 33.0 1.4 Sep-04 107.1 4.9 28.0 1.3 Oct-04 95.4 4.8 59.5 3.0 Nov-04 80.6 4.0 72.6 3.6 Dec-04 129.7 5.9 97.1 4.4 TOTAL 602.1 4.7 322.0 2.6 Market Capitalization US$ Millions Index July-04 29,665.9 1,577.3 Aug-04 31,118.9 1,752.5 Sep-04 33,168.3 2,089.8 Oct-04 34,392.8 2,296.1 Nov-04 36,042.9 2,362.0 Dec-04 37,579.7 2,568.0 CONTACT INFORMATION MONTHLY STOCK VOLUME VS INDEX (US$ Millions) 800 700 600 500 400 300 200 100 0 Stocks Index July Aug Sep Oct Nov Dec Contact Name Mr. Khaled Abdel Rahman E-mail karahman@egyptse.com Website www.egyptse.com 3,000 2,500 2,000 1,500 1,000 500 0 MONTHLY MARKET CAPITALIZATION (US$ Millions) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 July Aug Sep Oct Nov Dec PAGE 67
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