Cairo bourse in search of renewal

Economic Analysis by Dina Abdel Fattah
After the change in the Egyptian Exchange’s (EGX) leadership, an urgent plan is required to transform the country’s stock market from a burden on the economy into a strong and attractive hub for liquidity and investment.

Since the establishment of the first Egyptian stock exchange in Alexandria in 1883, followed a few years later by the Cairo exchange, Egypt was among the pioneers in introducing this financial institution to the region. By the early twentieth century, the Egyptian bourses had become some of the most prominent globally. Between 1900 and 1940, the market lived through its golden era, ranking among the world’s top five exchanges alongside London, Paris, and New York. Trading volumes reached record levels, fuelled by booming cotton exports and the flow of foreign capital, turning Cairo and Alexandria into a vibrant regional and international financial hub.

This momentum, however, did not last. With the wave of nationalisation in the 1960s, the market’s role diminished sharply. In 1961, the Cairo and Alexandria exchanges were merged into a single entity, and major private companies disappeared from the trading floor after being absorbed into the state sector. During the 1970s, with the introduction of the “open-door” economic policy, the market began to breathe again, though trading remained limited until the institutional reforms of the 1990s. The 1992 Capital Market Law restructured the exchange, modernised its infrastructure, and paved the way for new listings.

In the first decade of the 2000s, the Egyptian stock market witnessed a notable boom, with its benchmark index reaching record highs. Yet the global financial crisis of 2008, followed by the political and economic turbulence of the 2011 revolution, plunged the market into a sharp downturn. Trading was suspended for months, and billions of pounds in market capitalisation were wiped out. Despite attempts at recovery in the following years, the exchange still suffers from weak liquidity, a scarcity of major IPOs, and declining regional prominence compared with younger markets such as Dubai, Abu Dhabi, and Riyadh, which have succeeded in attracting vast global investments and stealing the spotlight.

Against this backdrop, the government’s decision to appoint Dr. Islam Abdel Azim Azzam as Chairman of the Egyptian Exchange, succeeding Ahmed El Sheikh, along with Dr. Mohamed Sabry El-Shazly as Vice Chairman, replacing Heba El-Serafy, comes at a critical juncture. Azzam, with his academic and regulatory background, has the capacity to craft a modern strategic framework for the market, while El-Shazly’s extensive operational and supervisory experience equips him to enforce discipline and curb malpractice. This balance between vision and execution presents a long-awaited opportunity to embark on a genuine reform path.

The reform agenda must begin with boosting liquidity by raising free float levels, encouraging both government and private sector IPOs, and granting incentives to institutional investors. Restoring confidence is equally crucial, through stricter disclosure requirements, quarterly transparent reporting, rigorous oversight—especially of small-cap platforms such as NileX—and the enforcement of penalties and early warning mechanisms. Diversification of financial instruments is another pillar, with the introduction of derivatives, a more active sovereign and corporate bond market, and the expansion of ETFs, sukuk, and green bonds. Attracting foreign investment will require stabilising exchange rate policy, facilitating capital inflows and outflows, and launching international promotional campaigns to reposition Egypt as a regional destination.

Equally important is technological modernisation: upgrading trading platforms to handle larger volumes securely, employing artificial intelligence for real-time surveillance, and implementing contingency plans to guarantee continuity of trading under stress. Finally, linking the exchange to the real economy is essential—by aligning it with the government’s IPO programme, providing financing channels for SMEs, and encouraging family-owned businesses to convert into listed joint-stock companies.

Despite more than 140 years of history, the Egyptian stock market remains trapped in a stark gap between the scale of the economy—nearly $500 billion GDP—and daily turnover that rarely exceeds $300–500 million. The contrast with regional peers is striking: Saudi Arabia’s Tadawul boasts a market capitalisation above $2.5 trillion and daily trades in the billions, while Dubai and Abu Dhabi, with far smaller economies, have leveraged high-profile IPOs to attract foreign liquidity and global attention.

The paradox is clear: Egypt was one of the first in the region to establish a stock market, yet today it lags behind newer entrants whose dynamism has redefined regional capital flows. For international institutions, Egypt is still viewed as a market of “untapped potential” rather than one delivering real depth and breadth. And herein lies the danger: a stock market that should serve as the mirror of the economy instead reflects fragility and underperformance.

As Europe edges towards recession and global growth slows, Egypt’s need for a robust financial market is greater than ever. A strong exchange capable of attracting liquidity, supporting government IPOs, and financing private-sector growth could shield the economy from external shocks. Leaving it weak, under-traded, and narrow is not just a financial failure but a macroeconomic liability—one that undermines growth prospects, raises the cost of capital, and weakens Egypt’s competitiveness regionally and internationally.

A market that fails to reflect the strength of Egypt’s economy risks distorting it. Reform is not an option — it is an imperative.