The Egyptian Exchange (EGX) has not received any requests from companies which are listed and trade in US dollars to switch to Egyptian pounds following the new regulations issued in mid-March, EGX chairman Mohamed Omran said.
The EGX issued this new rule to allow companies to avoid the poor trading on the dollar due to the erosion of foreign currency reserves. However, companies which are listed and trade in US dollars in the EGX are reluctant to take advantage of this regulation.
The companies attributed their reluctance to investors who initially chose those stocks as they are traded in dollars, as well as the high dollar price on both the official and informal market.
The EGX did not contact firms with shares traded in dollars to find out their opinion before giving freedom to trade in pounds.
Omran does not have expectations as to whether these companies will switch to pounds as it is up to each company to decide.
Orascom Construction was allowed to enrol its shares in dollars and then offer the shares for trading in pounds over the past year. Therefore, the EGX decided to allow companies the option to shift to trading in pounds, Omran said.
These new regulations do not allow for trading shares in two different currencies. Companies must choose between offering their shares in local or foreign currencies.
There are four conditions for shifting trading from a foreign currency to pounds. The first condition is setting a timeline before making the move to enable investors to sell their shares.
The second condition is the approval of the Extraordinary General Assembly of the company attempting the shift. Foreign companies listed on the EGX in foreign currencies can make the shift with the consent of its Board of Directors.
The third condition is to provide the minutes of the Extraordinary Meeting or the Board of Directors among the listing documents after verifying them with relevant governmental bodies, such as the General Authority For Investment and Free Zones (GAFI).
After this step, the company requires approval from Misr for Central Clearing, Depository and Registry (MCDR). The company must present what benefits MCDR will receive upon registering the company’s shares under the central depository system in accordance with the input currency and trading them in pounds.
Nine companies in the Egyptian market have shares traded in dollars: Naeem Holding, Maridive, Egypt Kuwait Holding, Trans Oceans Tours, Gulf Bank, Faisal Islamic Bank, Al Arafa, Nilesat, and SAIB Bank.
Egypt Kuwait Holding did not consider shifting its shares to pounds. “Investors are keen to keep the trade in dollars, as this was why they invested in the company in the first place,” senior investor relations manager at the company Haitham Abdel Moneim said.
Although some investors face challenges in trading in dollar shares due to the foreign currency shortage, they believe that the high price of the dollars means more profits or at least keeps the value of their savings in light of the pound’s recent depreciation, Abdel Moneim said.
The Central Bank of Egypt (CBE) devaluated the Egyptian pound by 13.5% in March 2016, bringing it down from EGP 7.78 against the dollar to EGP 8.83, while the price of the dollar on the informal market has reached as high as EGP 11.5 in the last month.
Egypt Kuwait Holding will hold an Extraordinary General Assembly to discuss the move if it receives requests from shareholders to switch to trading in pounds, Abdel Moneim said.
Al Arafa is studying the new regulations and has not yet decided to shift or even consider the move, investor relations manager at the company Mohamed Talaat said.