The Egyptian Exchange (EGX) plans to launch a new index to track the performance of small- and medium-sized enterprises (SMEs) during this year. The “Tamayoz” index will include the best SMEs in Egypt, based on the strength of financial and operational performances.
Mohamed Farid, Chairperson of the EGX, said the new index is part of the authority’s strategy to stimulate the SMEs market in Egypt.
By next June or July, the EGX will adopt a new mechanism for determining the closing prices of stocks, either through the auction or the weighted moving average, he also said.
Daily News Egypt interviewed Farid to learn more about the EGX’s strategy for 2021, and whether the current investment climate in the stock market can attract new IPOs, especially in light of the ongoing novel coronavirus (COVID-19) pandemic.
In light of the ongoing pandemic, is the EGX ready to receive new IPOs?
The current level of market trading and the companies’ turnout indicate that the EGX is well prepared to receive new IPOs, however it would be difficult to predict the performance of the EGX during 2021. The stock market’s performance now depends on the local and global economic situation and the COVID-19-related developments.
Where do you see the EGX in 10 years, and what are the changes that may occur to it?
Continuing the government-led economic reforms and the increase of IPOs will create a deeper and more attractive stock market with varied products and high trading volumes. We hope that the culture of investment in the EGX can spread among all social segments within the next 10 years. We also aim to attract pension funds to invest in the stock market, as they have huge financial capabilities that can support the EGX performance significantly.
The remote stock trading will also expand considerably in the coming years. Technological development will always have a role in facilitating and developing trading operations.
What is the work agenda of the EGX in 2021?
The EGX management will focus on two main goals during the current year. The first is the launch of the “Tamayoz” index, which will track the performance of SMEs. The index will include the best SMEs in Egypt, based on the strength of financial and operational performances. It is part of the authority’s strategy to stimulate the SMEs market in Egypt.
The EGX also aims to upgrade its registered sponsors, re-evaluate the listed companies to define the distinct and regular ones, and classify the listed stocks according to several financial criteria. This includes the sales growth, profits, and dividends.
As for the second goal, the EGX aims to adopt a new mechanism for determining the closing prices of stocks, either through the auction or the weighted moving average by next June or July.
Some institutions tend to execute their transactions on the latest trading price of the share, something that brokerage firms cannot follow because there is no specific closing price before the session ends. The closing prices are calculated as the total value of transactions made on a given share divided by the absolute number of transactions made over the course of a day, or a weighted average.
The EGX would conduct a five-minute closing auction toward the end of the session, in which it would receive buy and sell orders. The last five minutes of the trading session will see transactions executed based on the closing price set by the auction.
The price set by the auction would override the weighted average calculated from the latest session price. If the auction conditions are not met, the weighted average would become the closing price.
The weighted average will be determined during a specific period of in the session, and not the entire session.
What are the latest developments of the commodity exchange?
A great effort is being made with the new company to manage the commodity exchange and all the parties concerned with the issue. The feasibility study of the project indicated that it would be completed within 48-52 weeks, and therefore it is likely that we will have a commodity exchange market by the end of the year or early 2022. At the present time, all possible trading mechanisms in the commodity exchange are being studied.
Several entities will be involved in the new exchange, including warehouses, trade and supply companies, factories, credit rating bodies, banks, and others. Each entity will have a special classification.
The new company responsible for the commodity exchange will manage and regulate trading procedures and commodity promotion operations, as well as the storage mechanisms of these products.
Last year, the Economic Ministerial Committee approved the establishment of the Egyptian Commodity Exchange, as the Prime Minister issued Decree No 182 of 2020, to establish an Egyptian joint stock company, and its purpose is to launch a market for trading on some storable commodities.
What is your plan regarding the anticipated Futures Exchange?
We currently focus on the completion of procedures to launch the commodity exchange as a first step. The time frame for activating the futures exchange has yet been determined.