Egyptian Exchange

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Egyptian Exchange
البورصة المصرية
Type Stock Exchange
Location Cairo, Egypt
Key people Dr Mohamed Omran (CEO)
Currency Egyptian Pound
Market cap (EGP) 417 billion[1]

Egypt's Stock Exchange, now Egyptian Exchange (EGX), comprises two exchanges, Cairo and Alexandria, both governed by the same board of directors and sharing the same trading, clearing and settlement systems.

  • Currently chaired by Dr. Mohamed Omran.

The Alexandria Stock Exchange was officially established in 1883, with Cairo following in 1903. Both exchanges were very active in the 1940s, and the combined Egyptian Stock Exchange ranked fifth in the world. The central planning and socialist policies adopted in the mid-1950s led to the exchange becoming dormant between 1961 and 1992.

In the 1990s, the Egyptian government's restructuring and economic reform programme resulted in the revival of the Egyptian stock market, and a major change in the organisation of the Cairo and Alexandria stock exchanges took place in January 1997 with the election of a new board of directors and the establishment of a number of board committees.

Sherif Raafat, former chairman of the board of directors, sought to modernise the exchange by:

  • Creating a coherent organisation structure with a clear division of authority and responsibilities;
  • Deciding to install a new state-of-the-art trading, clearing and settling system conforming to international standards (in May 1998 a contract was signed with EFA Software Ltd., a Canadian company, to this end);
  • Developing new membership and trading rules, as well as arbitration and dispute resolution procedures;
  • Planning the improvement of the clearing, settlement and payment systems.

History[edit]

Alexandria Stock Exchange

Location of the Alexandria Exchange

During the 19th century, (Alexandria's Futures Market) was one of the oldest in the world.[2] Alexandria Stock Exchange was established in 1883.[3] The first local recorded cotton transaction took place in 1885 in Alexandria's Café de l'Europe on Place des Consuls which was later renamed Mohammed Ali Square. It was there that cotton merchants met and cut deals based on supply and demand for the long staple Karnak and Menouf or the short to medium staple Ashmouni, Giza and Zagora. Over the years, deals extended to cotton seed varieties such as Hull, Afifi and Sakellaridis.

The first cotton deal-makers eagerly waited for the weekly arrival of the news-sheets from Europe to guide future operations. Reputation counted for everything. Cotton growers who delivered on time were courted by exporters and received large orders the following season. Timing and reliability was of the essence if profits were to be made.[4]

From Café de l'Europe cotton deal-makers moved to a nearby building and as business grew, the Association Cottoniere d'Alexandrie (later the Alexandria General Produce Association or AGPA) was created for the purpose of trading in cotton, cotton seeds and cereals in the spot and future markets.

In 1899, during the reign of Khedive Abbas Hilmi II, AGPA moved to an imposing new building, henceforth called The Bourse on Mohammed Ali Square. The Alexandria Bourse became a city landmark featuring in postcards, books and city guides.[5] In more ways than one, the bourse became the focal point of the city's financial community. The Association's old premises meanwhile, was transformed into a bank, and later on into the Top Hat night club.

Cotton forward contracts were legalized in 1909 to coincide with Egypt's recovery from a massive economic slump brought on by the financial crash of 1907 when banking and real estate institutions collapsed due to excessive speculation. So far, government intervention had been practically absent. On the other hand, the spot market of Minet al-Bassal was left alone until 1931.

Cairo Stock Exchange

During one of their informal turn of the century meetings at the Café New Bar, Cairo's merchants and brokers were reminded once more by their leader, Monsieur Maurice Cattaui, that the time had come for Cairo to follow Alexandria's example and have its own Bourse. With the number of limited liability companies reaching 79 at an aggregate capital of 29 million pounds, the city's taipans could no longer conduct pork barrel politics on Cairo's sidewalks or inside coffee shops and hotels. And so it was when on Thursday, 21 May 1903,[6] an ad hoc site committee presided by Maurice Cattaui Bey, chose the old premises of the Ottoman Bank (today Groppi-Adly Branch) on Maghraby Street as the elected but temporary official headquarters of the newly incorporated Bourse and Banking Company of Egypt Limited . a.k.a. Bourse Khediviale du Caire.[7]

With ambitious plans in mind, the new company leased the premises for a non-renewable period of six years at an annual rent of 400 Egyptian pounds. In the meantime, an international competition was initiated for the design of a dedicated bourse to be situated at the center of Cairo's European district, not far from the National Bank of Egypt (today Central Bank).

The prize for best design went in April 1907 to the French award-winning architect Raoul Brandon (designer of the Cairo Orosdi-Back department store). The timing couldn't have been better, or so everyone thought. Emboldened by success and drunk on growth, the promoters of the Cairo bourse were in an excessive mood. It was public knowledge that when lumped together, the Cairo and Alexandria Bourses rated among the world's top five Stock Exchanges. Egypt's economy was at an all-time high and the number of companies traded in the Cairo Bourse alone had reached 228 with a combined capital of 91 million pounds. Seventy-three brokers and intermediaries were on hand to take care of the spiraling share trading. The modest premises on Maghraby Street had most certainly outlived its usefulness. It was time for swank.

But like the swing of a pendulum, the high state of euphoria disappeared overnight. Prudence having given way to high-risk speculation, what had started out with a real estate boom in Egypt, ended in what became known in the annals of speculative history as the Crash of 1907.

The Egyptian Exchange was formerly known as the Cairo and Alexandria Stock Exchange (CASE). In 2009, the CASE 30 Index (made up of the 30 largest companies being traded) changed its name to the EGX 30 Index.[8] In 2011 the EGX 20 Index, composed of the twenty most active and liquid stocks on the Egyptian Exchange, was launched.[9]

By the end of November 1998, there were 833 listed companies on the Egyptian Stock Exchange with a market capitalisation of approximately L.E. 71.3 billion (up from 627 companies listed in 1991 with a market capitalisation of L.E. 8.8 billion).

Timeline[edit]

  • In 1883, Alexandria Stock Exchange was established.[10]
  • In 1903, Cairo Stock Exchange was established.[11]
  • In 1909, the issuance of the first general regulations for stock exchanges was made.[12]
  • In 1947, Over The Counter (OTC) market was commenced for the first time in Egypt.[13]
  • In 1953, the first law to regulate the market trading after 1952 revolution was issues.[14]
  • In 1961, the stock exchange was closed post issuing nationalization laws.[15]
  • In 1980, The Capital Market Authority (CMA) was established.[16]
  • In 1994, the exchange shifted to an automated order-driven system. Also, Mist For Clearing, was established. Misr for Clearing is the entity responsible for settlement and depository of transactions in the exchange.[17]
  • In 1996, the privatization program was initiated through offering in the stock exchange. In the same year trading has been unified between Cairo and Alexandria Stock Exchanges.[18]
  • 1997 Cairo and Alexandria Stock Exchange was added to the International Finance Corporation (IFC) Global[19] and Investable Indices
  • In 2001, Cairo and Alexandria Stock Exchange was included on the Morgan Stanley Capital International (MSCI) Emerging Market Free Index (EMF) and EMEA and All Country World Index.[20]
  • in 2003, US Securities and Exchange Commission (SEC) has designated EGX as a "Designated Offshore Securities Market" on 16 April 2003. The designation follows an application made by EGX for consideration by the SEC for the status of a "designated offshore securities market" within the meaning of Rule 902(b) under Regulation S of the Securities Act of 1933.[21]
  • In 2009, EGX Launches EGX 70 Price Index, Renames CASE 30 Index to EGX 30 Index and Computes EGX 30 Index (in US Dollar Terms)[22]

Modernization Efforts[edit]

The trading system at EGX has perceived gradual development from an outcry system (prior to 1992) to an automated order-driven system.

In May 1998, EGX contracted with "EFA", a Canadian software company (which was first bought by the Australian Computershare company and was recently acquired by the leading international technology provider "OMX"), to provide a new trading, clearing and settlement system. The trading component of this system started operations in May 2001, after applying a locally developed automated trading system for almost 9 years.[24]

In its endeavor to keep abreast with the latest technological advancements, based on its vision to become the financial hub and investment gateway in the Middle East and North African (MENA) Region that best serves its stakeholders, EGX has upgraded its trading platform to OMX high performance "X-Stream" solution, and launched it on 27 November 2008, replacing the old trading system "EFA Horizon".

X-stream is designed to support the increasing volume of trading on EGX as well as the simultaneous trading multiple product classes including equities, debt, commodities, ETFs, futures and options in both an exchange traded and cash/OTC/derivatives environment. X-stream has the capacity to meet the future needs of EGX.

Moreover, EGX offers an in-house developed OPR program that deals with the IPO's and private placements before execution in the market. This program facilitates orders' registrations and cancellations, assures accurate calculations of the allocation percentages and enables the market to absorb efficiently the surge in the amount of placements.

EGX 30 Index[edit]

The Egyptian Exchange has launched its main index EGX30 on February 1, 2003.[25] The index includes top 30 companies in terms of Liquidity and activity. The Index is weighted by market capitalization and adjusted by free float. EGX30 avoids concentration on one industry and therefore has a good representation of various industries/sectors in the economy. The Egyptian Exchange started publishing EGX30 Index, the previously named CASE30 on 2 February 2003, which has a base date of 1/1/1998 and a base value of 1000 points. As of 1 March 2009, the Egyptian exchange started publishing EGX30 in US$ terms, and renamed CASE30 to EGX30 reflecting the replacement of Cairo and Alexandria Stock Exchanges by the Egyptian Exchange (EGX), as per the amendments in the Capital Market Law No. 95/1992. EGX Index Committee is an independent committee consists of 4 members and chaired by EGX Chairman. The members are market participants from member firms, fund managers and banks.

Eligibility Criteria

  • Liquidity: is the most important criteria for selecting the constituents that comprise EGX30. All traded companies are ranked according to total value traded for the period prior to the next rebalance, after excluding “OPR” deals.
  • Number of trading days: Eligible companies that met the liquidity criteria must be traded at least 50% of the trading days during this period. For example, if the total number of traded days during the last six month period is 120 (5 x 4 x 6). The company must be traded at least 60 days during this period to join the index.
  • Free float: EGX has amended the required free float of any company included 3

in the index to be at least 15%. The free float is the freely floated shares that are traded and held by the public (tradable shares).

Index Rebalance EGX30 constituents are reviewed on semi-annual base (1 February and 1 August) by EGX Index Committee, whereby constituents are changed (added or deleted), if necessary, based on the above-mentioned criteria.

Taxation Policy[edit]

Transactions taking place is the stock exchange is not subject to capital gain tax. Dividends distributed by companies listed on the exchange to shareholders are not subject to tax. However, in 2013, a 10% capital gain tax applicable on mergers and questions was imposed on the exchange.[26] In 2013, Finance Ministry announced that the government intended to cancel a 10 percent capital gains tax imposed on mergers and acquisitions as well as a planned tax on cash dividends.[27]

Hours[edit]

The exchange has normal trading sessions from 10.30am to 2.30pm, local time, on all weekdays, except Fridays, Saturdays and holidays declared by the exchange in advance.[28]

Egyptian Revolution of 2011[edit]

The Egyptian stock exchange plummeted 6.25% following the beginning of the Egyptian Revolution of 2011 on 25 January.[29][30]

The Egyptian Stock Exchange closed at the end of trading on the 27th January after the benchmark EGX 30 Index (EGX30) plunged 16 percent that week amid the uprising. The exchange reopened on Wednesday 23 March after being closed for almost 8 weeks. The market fell by a further 8.9% on reopening. .[31]

Since the President Ben Ali fled neighboring Tunisia on January 15, the volatility of the EGX 30 Index has proven to be unmatched within the Arab world. Since the close of business on January 13 (7156 volume at closing), the EGX 30 Index has shed 45 percent of its volume - a drop of 3186 points, from 7156 to 3970 (December 8).[32]

See also[edit]

References[edit]

  1. ^ "market cap". Retrieved 13 December 2013. 
  2. ^ http://www.egx.com.eg/English/History.aspx. Retrieved 13 December 2013.  Missing or empty |title= (help)
  3. ^ "Milestone of Alexandria Stock Exchange". 
  4. ^ http://www.egy.com/landmarks/97-11-01.php. Retrieved 13 December 2013.  Missing or empty |title= (help)
  5. ^ http://www.bibalex.org/alexmed/projects/Details.aspx?ID=1005f340-c87c-47a1-9871-3032fbc614f2. Retrieved 13 December 2013.  Missing or empty |title= (help)
  6. ^ "establishing Cairo Stock Exchange". 
  7. ^ http://www.egx.com.eg/English/History.aspx. Retrieved 13 December 2013.  Missing or empty |title= (help)
  8. ^ "EGX30 Index Calculation". Retrieved 12 December 2013. 
  9. ^ "Egypt - New EGX20 index launches today". MENAFN. 3 October 2011. Retrieved 6 October 2011. 
  10. ^ "Establishing Alexandria Stock Exchange". Retrieved 13 December 2013. 
  11. ^ "Establishing Cairo Stock Exchange". 
  12. ^ "First Regulations of the Market". 
  13. ^ "First OTC". 
  14. ^ "state regulation". 
  15. ^ "Nationalization". 
  16. ^ "Establishing Capital Market Authority". 
  17. ^ "Establishing Misr for Clearing". 
  18. ^ "Privatization Program and Unifying trade between the two exchanges". 
  19. ^ "CASE added to IFC Global Indencies". 
  20. ^ "Addition to Morgan Stanley Index". 
  21. ^ "SEC designated EGX as an offshore market". Retrieved 13 December 2013. 
  22. ^ "EGX30". 
  23. ^ "Sustainable Stock Exchanges Initiative: Exchanges listing over 4,600 companies commit to promoting sustainability". Sustainable Stock Exchanges initiative. Reuters. Retrieved 13 May 2014. 
  24. ^ "automation". Retrieved 13 December 2013. 
  25. ^ "EGX Index Calculations". Retrieved 13 December 2013. 
  26. ^ "Tax imposed on EGX". Retrieved 13 December 2013. 
  27. ^ "capital gain tax policy". 
  28. ^ Source: Bloomberg
  29. ^ Egypt stock market tumbles over 6 pct on protests, Yahoo News.
  30. ^ Egyptian stock exchange falls 6.25% in 15 minutes, Jpost.
  31. ^ Egyptian Market's Reopening. Wall Street Journal. March 24, 2011.
  32. ^ "bloomberg stock tracker". bloomberg news. 

External links[edit]