CAIRO: Cairo-based investment bank Beltone Financial launched Sunday a new market index, the BAM 30, which lists the top 30 companies based on liquidity.
The index will be rebalanced quarterly to make sure that the constituents meet the eligibility criteria, said Aladdin Saba, chairman and CEO of Beltone.
The BAM 30 was launched as Egypt’s main stock index, EGX 30, surged 90 percent this week since hitting a low in February from the effects of the global economic crisis.
The EGX hit bottom at 3,389 points in February, but has since risen 90 percent, closing at 6,463 points Wednesday as growing confidence saw foreign investor buy into blue chips.
Analysts attributed the rise to several reasons, namely the recent move by the Central Bank of Egypt (CBE) to cut interest rates for a fifth time this year. They also noted growing confidence in the market.
The BAM 30’s objective is to meet the needs of funds managers, the firm said, billing it as “the only index in the market that reflects the mutual funds investment guidelines as dictated by the capital market regulations.
The price index is weighted by free-float adjusted market capitalizatin, said Beltone.
BAM 30 reflects the performance of the 30 most liquid companies in the Egyptian Exchange and applies a 10 percent cap on a single stock’s weight on the index.
Stocks listed on the index must have a free float of at least 15 percent and at least 45 trading days in the pervious three months. Companies that make net loses for three consecutive years are excluded from the index as are companies that have foreign ownership restrictions.
Alyaa Gomaa, portfolio manager at Beltone and one of the team that built the BAM 30, said the main advantage of the index is that it minimizes the concentration risk resulting from having the bulk of the index weight in only a few companies.
The cap of 10 percent imposed on the index constituents ensures higher diversification and better representation of small and mid cap companies in the index, the firm said.
The aim of the new index is to better reflect the performance of the market as a whole, something which many say is the shortcoming of the country’s main EGX 30 index.
The “EGX 30 mainly reflects the performance of blue chips and not the whole market, said Osama El-Kholy, an Egyptian retail investor in the stock market for the past 10 years.
The BAM 30 will be accessible on Reuters Financial services, Bloomberg and on Beltone’s website.
The top 10 listed shares on the index are Orascom Telecom, Orascom Construction Industries, Commercial International Bank, EFG-Hermes, Mobinil, Telecom Egypt, Egyptian Kuwait Holding, Talaat Moustafa Group Holding, El Sewedy Cables and Ezz Steel.