Following the changes in regulations and legislative laws of the Egyptian capital market, eyes have been on the Egyptian bourse to examine which sectors will seek to expand their capital by getting listed. Daily News Egypt talked to several experts to understand how initial public offerings (IPOs) can assist the stock market in recovering after more than three years of stagnation.
Head of Egyptian Finance Association Ayman Metwaly said that, despite the emergence of strong purchasing power in the market after post-25 January Revolution downturn, companies maintain some reluctance due to the economic situation.
He explained that there are many state-owned enterprises and private companies that would receive overwhelming acceptance by investors if they decided to enter the stock market.
Member of the Egyptian Finance Association Mohamed Salah said that, following the removal of tax exemptions, several companies have exited the market. He added that, during the past five years, the market saw less than 20 new IPOs.
He added that companies such as MIDOR Petroleum Company, Egyptian Linear Alkyl Benzene (ELAB), and Misr Oil Processing and Fertilizers Company (MOPCO) have a good opportunity if they decide to enter the market.
He also said, after the annulment of the privatisation of Omar Effendi department store, the government can list part of its shares for trading, the optimal solution for the management of the resources needed to restructure and pay dues to the Kuwaiti investor.
Technical Analyst Islam Abdel Atty said that an important topic that needs addressing is the availability of regulations allowing newly established companies to offer their shares in the market. He stated that this will offer an alternative to banks, which are stricter at lending during this early period of businesses.
Abdel Atty said that IPOs of start-up companies will revive the market and attract new young investors.
Managing director of Amwal Financial Investment Company, Mohamed Gebril, said the absence of IPOs has limited investors to specific shares, but that would change as new companies are introduced to the market.
Financial analyst Mohsen Adel said that new IPOs will send a positive message to Arab and foreign investors and assure that the market still retains the vitality and dynamism it once had.
Deputy CEO of HC Securities and Investments Mohamed Metwally stated however that operating in a specific sector has little to do with the desire to join the stock market.
“I don’t think it is sector-oriented,” Metwally said, adding that “it is investor-oriented” and is chosen by “companies that require an increase in capital”.
Metwally said that the capital market is picked because of the “high lending rate”.
The stock market expert said that currently the bourse is the only venue left for companies.
Metwally said that, in banks, the growth rate in lending is “decimal when it should be at least twice the growth rate of the gross domestic product”.
“Growth rate is very small and doesn’t even reflect the growth in economic activities,” Metwally said on the banks’ lending rates.
Discussing criteria allowing a company to have a successful IPO, Metwally said that it mainly depends on the company’s “growth rate and profit margin”.