Both trading mechanisms and financial instruments are very important in the effective functioning and growth of the Stock Exchange.
When it comes to financial products, there has recently been a legal amendment to the Capital Markets law that set the regulatory framework for establishing and trading derivatives in the Egyptian market, so that is one of the items that we would want to introduce soon. This will add to the diversity of financial products, enabling investors to hedge their position for risk management purposes - even for investment purposes.
Hopefully if we manage to get the items that everyone is worried about being traded as futures for derivatives, it would be of added value. So for example, everyone is worried about the increased prices of real estate so if we manage to have indices on real estate and accordingly have futures on these indices, you would be able to hedge your position on the assumption that there will be an increase and either make some remuneration towards this price increase or benefit from the price increase, despite not being capable of buying the underlying asset itself. So these are some of the products that we’re tinkering with, and trying to push, in this area.
What are some of the anticipated benefits of the IPO program due to be implemented this year?
A core part of the deepening of capital markets, and the root for attracting FDIs and better participation from the private sector, is through expanding the ownership of state owned enterprises. So what has been announced by the government, represented by the Ministry of Finance, is that they have 23 companies – nine are already listed – to be listed and traded in the market. Hence they are going to expand the number of shares to be floated to the market. This in itself will directly attract new international investors to the market.
Foreign investors often express a need for more sizeable companies to be listed, especially following the devaluation. For someone to be able to put a ticket of 50 million dollars in one company, it could be the value of the entire company – not only the free float – so the more you expand on the free float size in the market, the more opportunities you create for investment.
So definitely the proposed IPO program will be beneficial – not only from a financial perspective for the government, but also because of the discipline required when you are listed on the Exchange. Companies need to abide by the listing rules and requirements, so they need to have quarterly financial statements published on time, board representation needs to be disclosed.
the interview with the chairman of the egx
- Mr. Mohamed Farid Saleh (continuation)