FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT JUNE 2012
EGYPTIAN EXCHANGE
CAPITAL MARKET DEVELOPMENT IN 2011
The year 2011 was considered a remarkable
year in the history of the Egyptian capital
market, after few years of overcoming a number
of crises that hardly knocked other markets, this
year the Egyptian Exchange faced both internal
and external tensions.
On the internal level, the year started with the
25th of January revolution, toppling down the
old regime. A transitional phase started which
lead the economy to retreat to one of its worst
levels ever. The economic growth plummeted
to its lowest levels with a notable aggravating
budget deficit due to the declining revenues
and increased spending in line with the fears of
diminishing reserves. This in turn led the foreign
investment to hit its lowest levels within seven
years to record US$ 2.2 billion on FY 2010/2011.
In addition, Egypt’s Government bonds credit
rating was downgraded four times within one
year.
On the external level, the situation was not very
different; with the heightening of the economic
crisis attributable to the deterioration of the debt
pinch in the U.S. and the downgrading of its
credit worthiness. Moreover, the US debt crisis
spread in other countries, especially in Europe,
representing a real threat to the global financial
system and running the risk of downward
spiral of uncertainty and financial instability.
Meanwhile, fears of a global recession, lingers
over, tumbling the global markets performance
sharply.
With EGX recording year-on-year losses of
around 50%, however, a large part of the losses
has been recorded prior to the 28th of January.
The market lost 21% in January, while in the
following 9 months; post the revolution, the
market lost around 30%. Worth mentioning, after
the revolution EGX performance mimicked that
of global capital markets which were affected by
the global crisis.
And due to political unrest and the banking
sector instability at the time, EGX was forced
to suspend trading to provide the legal entities
the proper time to undertake the necessary
measures for preventing the outflow of capital
involved in illegal acts.
Legislative Amendments to Increase Market
Depth
During 2011, EFSA and EGX management
focused on the legislative side in order to
achieve greater market protection. The year
started with precautionary measures which
largely contributed to minimizing the market
decline after re-opening. EFSA has undertaken
several precautionary measures for trading
resumption on EGX to assure the highest level
of protection for investors’ rights. First, the
price limits on the listed shares were amended,
according to which trading is suspended on a
stock for half an hour after a 5% change, and is
fixed and trading will continue till the end of the
trading session after a 10% change.
Moreover, EFSA approved several important
amendments including the adjustment of the
specialized activities standards (margin trading,
short selling and intraday trading) to include
larger number of listed companies, the listing
rules with regards to initial public offerings,
treasury stocks and enforcing companies to
release their shareholders structure and a
preliminary approval on the rules governing the
issuance and trading of sukuk in an attempt to
develop new investment tools to attract more
investments to the Egyptian capital market.
Furthermore, intraday trading rules have been
altered to be re-activated after being hindered
post the revolution.
Despite the hard circumstances Egypt is
witnessing, EGX played a leading role in
financing companies. Year 2011 witnessed the
listing of 9 companies, 4 in the main market and
5 in NILEX with a total value of LE 558.6 million
vs. 16 companies, with a total LE 1.9 billion in
2010.
The total value of raised capital reached
LE 7 billion during 2011, with 7 companies
increasing their capital through SPOs with a
value of LE 2.32 billion, 20 companies through
stock dividends worth LE 2.9 billion, while the
remaining took place through cash, Mergers &
Acquisitions, Swaps…. etc.
Due to the internal pressures and the
aggravation of the global crisis, foreign
investments in the Egyptian market recorded
an outflow of LE 4.3 billion during 2011.
Despite this efflux, the Egyptian market is still
maintaining strong foreign investments, where
the outflow in 2011 represents less than half of
the net Non-Arab foreign inflow in 2010 (more
than LE 8.4 billion), and less than 12% of the net
Non-Arab foreign inflow during the past 5 years
(around LE 33 billion).
Nonetheless, the out flow is considered
moderate, as it represents less than half of the
non-Arab foreign inflows in the Egyptian market
during 2010 (LE 8.4 billion).
Moreover, European investments dominated
foreign investments on EGX in 2011, capturing
around 49% of the total foreign investments,
after excluding deals. USA & Canada
investments accounted for 27% of the foreign
investments, while 18% were owed to Arab
Investments.
The Egyptian market was dominated by
Institutions, accounting for 59% of the value
traded during 2011, as opposed to 52% during
2010. In addition, individuals accounted for 41%
of the value traded during 2011, as opposed to
48% during the previous year.
The Egyptian Market Remains One of the
Most Attractive Markets in the Region
According to Standard and Poor’s, the Egyptian
market is considered one of the most attractive
markets in the Middle East and Africa Region
recording a PE of 10.47 vs. 15.86 for the region.
Meanwhile, the market recorded a high DY of
10.40% vs. an average DY for the region of
3.58% by the end of December 2011.
Due to the transitional phase events which
coincided with the global crisis, average daily
trading recorded around LE 716 million in 2011
declining from LE 1.3 billion in 2010.
Noteworthy, the last quarter of the year
witnessed a sharp decline in the average daily
trading to record LE 255 million.
On the other side and despite the harsh
economic conditions, 79% of the listed
companies attained profits during the first half
of the year. Similarly, in NILEX, 15 companies
recorded a net profit during the first half.
Absolute Reform to NILEX Listing, Trading
and Disclosure Rules took place this year to
re-direct NILEX to its primary goal as a gateway
for financing SMEs’ to grow. Listing rules have
been amended to ensure the presence of
promising companies with organized plans to
increase their capital. Additionally, trading rules.
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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