Egypt bourse: 2016 in review

As we come to the close of 2016, Amwal Al Ghad English reviews the major remarks that affected the Egyptian stock Exchange throughout the year.

This year can quite aptly be described as the year of surprises, as investors and the market alike witnessed the most unlikely of outcomes in terms of a number of reforms, decisions, and local as well as global events.

Included among these events was the decision by Britain to exit the European Union (Brexit), the victory of Donald Trump in the U.S. elections, the agreement by OPEC and non-OPEC countries on a supply cut in oil production and most recently the floating of the Egyptian currency against foreign currencies on November 3rd. Against this backdrop, investors will be looking ahead to 2017 as a year which promises both opportunity and volatility.

Market Remarks

January

–              Egypt plans to sell shares in state-owned companies

Egyptian presidency announced plans to list shares in state-owned bank and companies on the stock market, in a move aimed at jump-starting investment and boosting economic growth.

“The coming period will witness offerings of parts of the capital of successful Egyptian companies and banks on the bourse,” said presidential spokesman Alaa Youssef in a statement earlier on January 19th.

The government has later announced a five-year, multi-phase plan for its IPO programme. The first phase will include launching a number of successful companies, through capital increases or by selling part of the state’s shares, which ensures diversity in offering mechanisms in order to better suit the needs of each individual company.

The second phase will involve preparing a number of companies for IPO by providing state-funded capital, raised during the first round, to develop and enhance their operations, before they are offered to the market.

The government has set the programme’s target value at $5-10 billion increased over a three- to five-year time span. The announcement of the first IPO of state-owned companies in January 2017 is expected to include a list of companies that guarantee high returns in a short period of time, such as oil companies and public banks. While utility companies, such as electricity, will be launched at a later stage.

The programme will also see financial institutions, such as the Banque Du Caire offer 20 percent of its share, while the Arab African International Bank (AAIB) will offer 40 percent of its shares (20 percent from Egypt and another 20 percent from Kuwait), according to a statement from the governor of the Central Bank of Egypt (CBE).

The government has picked the NI Capital Company as its advisor for a programme aimed to list shares in state-owned companies on the stock market.

NI Capital, formed earlier in December 2015, is part of the state-run National Investment Bank (NIB), tailored for financial consultancies and assets management.

The programme is under the supervision of a committee involving Minister of Investment Dalia Khorshed, Minister of Finance Amr El-Garhy, and central bank deputy Lobna Helal.

February

–              Egypt bourse chief partakes in Africa Forum in Sharm El-Sheikh

Mohamed Omran, Chairman of the Egyptian Exchange (EGX), participated in a panel about the future of direct investment to the African continent at the African investment forum which was held in Sharm El-Sheikh on 20-21 February 2016.

The forum was under the auspices of Egyptian President Abdel Fattah al-Sisi and with the participation of a major number of heads and officials of the African continent.

March

–              Egyptian dairy firm Domty lists shares on Egypt bourse

The Egyptian Exchange (EGX) had approved Domty to start trading on the bourse from 22 March at a nominal value of 9.2 pounds. The shares of the dairy firm opened 10 percent higher in its first trading debut on Cairo stock exchange.

April

–  UN invites Egypt bourse chief for global event in Geneva

Upon an invitation from the UN, Egyptian Bourse chief Mohamed Omran headed to the Swiss capital, Geneva, to talk about the bourse’s sustainability experience at the United Nations’ conference there.

–              Egyptian bourse chief in U.S., partakes in IIF annual meetings

Egyptian stock market chief, Mohamed Omran took part in the Capital Market and Emerging Market Roundtable organised by the Institute of International Finance in Washington, DC, on April 17th, coinciding with the 2016 Spring Meetings of the International Monetary Fund and World Bank.

The roundtable was in the presence of some of World’s largest financial institutions such as Bank of America and Auerbach Grayson.

Omran hold a series of meetings with officials in Ashmore Equities Investment Group, and the Rock Creek Group, and QM Frontier Management, whose assets under management exceed $100 billion, aimed to showcase investment opportunities in Egypt and the current available incentives given to investors.

–              Bahrain, Egypt bourses sign dual listing agreement

As part of the two-day official visit of Bahraini King Hamad bin Isa Al Khalifa to Cairo, the Bahraini bourse signed on April 27th a cooperation agreement on dual listing process with its Egyptian counterpart.

The agreement aimed to enhance technological infrastructure and informatics for the Bahrain Bourse to contribute to facilitate the flow of investment between the two countries.

May

–              Egypt bourse chairs FEAS meetings in Bucharest

Mohamed Omran, Chairman of the Egyptian Exchange (EGX), have chaired meetings of the Federation of Euro-Asian Stock Exchanges (FEAS) in the Romanian capital of Bucharest on May 5th.

The meetings took up the legislative framework regulating capital markets in the FEAS member states, in addition to the latest developments as to improving the mechanism of the Automated Trading System (ATS) to carry out all the bourse’s transactions.

–              Egypt inaugurates the bourse’s first museum

Egyptian Investment Minister Dalia Khorshid inaugurated on May 8th the museum of Egypt Exchange on behalf of Prime Minister Sherif Ismail.

The museum has manuscripts and minutes of the bourse’s board and the handling of operations since its foundation135 years ago.

–              Egypt bourse elected to vice chair the Emerging Markets Committee in World Federation of Exchanges

Given the Egyptian Exchange (EGX) ongoing support for emerging markets, the Emerging Markets Working Group (EMWG) of the World Federation of Exchanges (WFE), elected EGX to be one of the Vice Chair of the EMWG, for a period of two years, starting May 24.

–              Egypt bourse earns the title of vice president of sustainability committee at FEAS

The Egyptian Exchange (EGX) won on May 26th the positions of the Vice Chairman of the sustainability committee of the Federation of Euro-Asian Stock Exchanges (FEAS).

June

–              Healthcare firm Cleopatra Hospital shares begin trading on Egypt bourse

Shares of Cleopatra Hospital Company S.A.E. (stock code: CLHO.CA) began trading on the Egyptian Exchange (EGX) on June 2nd, opening at 9 pounds per share.

–              Britain Votes to Exit the EU

On 23 June, the United Kingdom made the historic decision of leaving the European Union, after 43 years, in a resounding revolt against its political elite that puts question marks not just over the future direction of Britain, but of Europe and the even the global economic order.

With over three-quarters of the vote counted, the Leave campaign leads by over 4 percentage points, giving it a virtually unassailable lead.

Financial markets in Europe were prepared for a chaotic opening, with the pound having fallen over 10 percent overnight to its lowest level in over 30 years against the dollar. The euro, too, fell sharply against the dollar following the announcement of the vote results.

The Egyptian stock Exchange has been the most negatively affected market in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) and Caucasus and Central Asia (CCA) regions, shedding 5 percent roughly during 23-26 June after the June 2016 UK referendum.

On July 18th, Jeffrey Donaldson, the trade envoy of the British then prime minister David Cameron said Britain’s exit from the European Union will not affect trade relations between Egypt and the United Kingdom. Donaldson made these statements following a meeting that was attended by several Egyptian ministers and Egyptian business leaders as well as the CEO of UK credit bureau Export Finance, Louis Taylor.

Taylor said that Britain is ready to provide the proper amount of investments for a number of British projects in Egypt, especially in renewable and non-renewable energy, gas, oil, chemicals, and transportation. Egyptian Prime Minister Sherif Ismail welcomed the statement, adding education to the list of sectors.

On the other hand, an International Monetary Fund report said later in October that Britain’s decision to leave the European Union may leave a negative impact on the Egyptian economy.

The IMF expected the reliance of some banks in Bahrain, Egypt, Qatar, and the United Arab Emirates on wholesale borrowing from the United Kingdom to be an issue in the event of a spike in funding costs.

Countries with vulnerable fiscal position such as Egypt are likely to tap international markets in the upcoming months to finance their budget deficit, the IMF indicated.

July

–              Egypt bourse chief tackles green finance at UNCTAD conference in Nairobi

Egyptian stock exchange chief Mohamed Omran took part in the fourteenth session of the United Nations Conference on Trade and Development (UNCTAD) in Nairobi, Kenya.

The conference took place from 17 to 22 July, and featured ministerial debates, high-level round tables, thematic events, a World Investment Forum, a Global Commodities Forum, a Youth Forum, and a Civil Society Forum, among other events.

Around 7,000 delegates convened at the Kenyatta International Convention Centre (KICC) at city centre where the UN agency held its fourth conference four decades ago. aligned movement then, were the main reasons for the led to the choice of the East African city as the venue.

August

–              Egypt reaches initial US$12 billion agreement with IMF

Egypt and the International Monetary Fund (IMF) reached a staff-level agreement on August 11th on a three-year US$12 billion fund aimed at bringing down budget deficit and debt, in addition to helping increase Egypt’s economic growth.

“I am pleased to announce that, in support of the government’s economic reform program, the Egyptian government, the Central Bank of Egypt (CBE) and the IMF team have reached a staff-level agreement on a three-year Extended Fund Facility (EFF) in the amount of SDR 8.5966 billion (422 percent of quota or about US$12 billion),” Chris Jarvis, IMF mission chief for Egypt, said in a statement.

–              Egypt’s parliament approves VAT at 13% rate in 2016/17

Egypt’s parliament approved on August 28th the long-delayed value added tax (VAT) at a rate of 13 percent for the 2016/17 fiscal year, but said it will rise to 14 percent the following year.

–              Egypt bourse issues amendment to suspend companies failing to send financial statements on time

The Egyptian bourse issued a new amendment to the executive procedures for registration regulations. This amendment obliges listed companies to post their quarterly financial statements within 45 days from the end date of the specified legal period for sending financial statements.

In the case that this commitment is breached, the company’s shares will be suspended from trading.

This amendment comes as a substitute for an old rule, which prevented a company’s shares from being suspended from trading unless 15 days have passed since the specified period for sending financial statements for two consecutive financial years.

EGX chairperson Mohamed Omran said that the amendment to this article was an urgent matter. The rule in its old form allowed companies to delay sending their statements for long periods before the EGX could take legal action, which is incompatible with the protection of investors’ rights.

September

–              Egypt bourse chief heads to Singapore for UN SSE Global Dialogue

Egyptian bourse chief Mohamed Omran attended the UN’s 2016 Sustainable Stock Exchanges Global Dialogue, took place in Singapore, on 5-6 September.

The 2016 SSE Global Dialogue aimed to provide a platform for stock exchanges to meet with their peers and stakeholders to evaluate the impact of new global sustainable development and green-finance policy agendas on capital markets.

Omran participated in the event based on an invitation by UN’s Sustainable Stock Exchanges (SSE) initiative, as he shared best practices on sustainability and capital markets.

Held once every two years, the SSE flagship Global Dialogue is a unique global gathering designed to bring together market leaders to analyse, promote, and foster communication on stock exchanges’ sustainability initiatives. Attracting speakers and audience members from around the world, the SSE Global Dialogue has become the main global platform for convening dialogue on sustainable capital markets.

–              Egypt enlists public sector company MOPCO on stock exchange

Trading on the Egyptian company MOPCO’s stocks commenced on September 7th, making it the first public sector company to be enlisted on the stock exchange in 10 years. The stock value sky rocketed by 395 per cent at the start of trade.

Founded in July 1998, MOPCO is one of the petroleum sector companies located in a free zone in Damietta.

November

–              Egypt extends delay on capital gains tax amid currency crunch

On November 2nd, Egypt delayed the introduction of a capital gains tax on equities for three more years, as it tries to attract investors to help ease a hard currency crunch that’s hurting growth.

The postponement was included in a group of tax exemptions decreed by the Supreme Investment Council, the Presidency said in an e-mailed statement a day later. They include a 5-year income tax relief for new agricultural and manufacturing investments in Upper Egypt, which abuts the Nile, as well as discounts on land prices in new urban centers planned by the government.

The capital gains tax was first delayed — for two years — in 2015. The decision drew criticism from the IMF, which said Egypt’s rich would be paying less to trim the budget deficit. The government said at the time it was protecting the competitiveness of the country’s financial markets.

–              Egypt floats pound, raises key interest rates 300 basis points

Egypt’s central bank decided on November 3rd to freely float the pound and raise key interest rates as part of a set of reforms aimed at alleviating a dollar shortage and stabilizing the country’s flagging economy.

The Central Bank of Egypt (CBE) said its decision to liberalise the exchange rate is part of a government reform programme that aims at “trimming the budget deficit and cutting public debt.”

It added in a statement on its official website that the new move is meant to “eliminate trading the currency on the black market, boost the economy and achieve higher growth rates.”

The new measures included raising key interest rates by 300 basis points.

The overnight deposit rate, the overnight lending rate and the rate of the CBE’s main operation have been raised to 14.75 percent, 15.75 percent and 15.25 percent respectively.

The market took off after the central bank floated the Egyptian pound, making stocks much cheaper for foreign investors and drawing capital inflows that could eventually end the country’s endemic hard currency shortage.

Foreign investors have been net buyers of Egyptian stocks every day since the float.

–              Egypt reduces budget deficit with harsh cuts to fuel subsidies

Deep cuts to fuel subsidies have allowed Egypt to sharply reduce its budget deficit, Egyptian Oil Minister Tarek el-Molla announced on November 3rd, who said it would take at least seven years before the country could return to being a net energy exporter.

“We have saved billions of dollars in the last year,” Tarek el-Molla, minister of petroleum and mineral resources, said of reductions in fuel subsidies from $9 billion in the financial year that ended in June to a projected $7.7 billion for the same period next year. “Over five years we will rationalise this further,” he added.

While cheap fuel prices have led to “misuse and high consumption”, the collapse in crude prices in the past year had reduced some of the pressure, el-Molla stated.

–              Brazil, Egypt bourses sign MoU for mutual cooperation

Egypt and Brazil’s bourses have signed on November 6th a memorandum of understanding that includes mutual cooperation and the exchange of information across both the two exchanges’ business areas.

BM&FBOVESPA and the Egyptian Exchange (EGX) announced in Cartagena, Columbia during a meeting of the World Federation of Exchanges (WFE), the signing of the MoU.

BM&FBOVESPA is the 13th largest stock exchange in the world; while EGX is one of Africa’s ten largest exchanges and the oldest.

Through this agreement, the two exchanges will create possibilities for a range of opportunities to be studied and explored for the development of their businesses, products, and markets and also the opportunity to share knowledge and build on both exchanges’ strategies of international strengthening in the search of new opportunities.

–              Egypt bourse signs Marrakech Pledges to promote green markets in Africa

Egyptian bourse has signed the Marrakech pledge to promote green capital markets in Africa” during the Parties Conference for climate change COP22 held in Marrakech, Morocco, on November 7-18.

Mohamed Omran, chairman of the Egyptian stock Exchange, has signed the pledges, as part of the Egyptian bourse’s contribution to support sustainability in the securities markets internationally and regionally.

Other stock exchanges, including the Casablanca Stock Exchange, Tunis Stock Exchange, and Nigeria Stock Exchange have signed the pledges.

In addition, the Supervisory authorities of the capital markets, also signed the pledge including the Egyptian Financial Supervisory Authority (EFSA) and Morocco’s capital market.

EGX’s signature on pledges of Marrakech and its participation in the conference come to enforce the efforts in its contribution to the preparations for the conference during July. It is also a commitment to the promotion of green finance in the African capital markets, which comes under the title “open capital markets in countries of the South towards climate change.”

Marrakech conference focused on the activation of Paris Agreement and the mechanism for integration of the efforts of the parties and non-parties in the field of environment and to speed up concrete initiatives and the development of private financing channels in the most vulnerable countries to climate change.

–              Donald Trump Wins US presidential election 

In one of the most shocking U.S. elections in modern political history, Donald Trump has defeated Hillary Clinton, was announced the new president of the United States on November 9th. Stocks across Europe closed deep in positive territory, rallying back from an initial crash as the shock of the fact that Donald Trump is the next president of the United States. All of Europe’s biggest bourses were significantly down soon after the European open, crashing lower thanks to the uncertainty that a Trump presidency brings to the markets. Despite crashing in early trade, stocks in Europe rallied in the afternoon, gaining quickly. At the European close, several indexes were more than 1% higher, swinging as much as 4% from their opening prices.

U.S. stocks rose sharply following the announcement of the election results in a dramatic turnaround from deep overnight losses as Wall Street embraced the upset presidential election victory of Republican Donald Trump.

–             IMF finally approves $12 billion loan to Egypt

The International Monetary Fund’s executive board on November 11th approved Egypt’s request for a $12 billion loan facility, after the North African country met its requirements to implement tough measures to revive its floundering economy.

Later, the Central Bank of Egypt (CBE) said it has received the first tranche of the IMF loan, amounts to $2.75 billion.

–              Egypt bourse hosts Euro-Asian stock exchanges federation annual meetings

Egyptian stock exchange (EGX) has hosted on November 16-17 the annual conference of the Federation of Euro-Asian Stock Exchanges (FEAS) in Sharm El-Sheikh, with the participation of more than 25 heads of European, Asian, and Arab stock exchanges.

–              Egypt wins Euro-Asian stock exchanges federation presidency against Iran

On November 17th, the Federation of Euro-Asian Stock Exchanges’ (FEAS) General Assembly has elected Mohamed Omran, Chairman of the Egyptian Exchange (EGX), after garnering the majority of votes for the federation presidency for the second consecutive time.

In the presence of 29 head of European, Asian and Arab stock markets, EGX had 24 votes against Iran Fara Bourse, as the first FEAS president from outside Turkey since the federation establishment 20 years ago.

The General Assembly appreciated the Egyptian bourse’s efforts during its presidency for FEAS in the first term, notably in improving the federation’s corporate governance standards and maximising the member exchanges’ capabilities, as well as to developing the trade surveillance efforts.

–              ASEA picks Egypt bourse chief as head of capital markets standards committee

The African Securities Exchanges Association (ASEA) has chosen on November 28th Egyptian bourse (EGX) chairman Mohamed Omran as head of the capital markets standards committee for the third time in a row.

The capital markets standards committee is tasked with standardising the criteria on which African stock exchanges depend to issue their statistics.

This was during the ASEA Executive Committee meetings in Kigali, Rwanda.

ASEA executive committee is authorised to set the association’ trends, strategy, and to develop a deeper cooperation and integration among African stock exchanges in various fields. EGX is an active member of ASEA and has contributed significantly in the association’s development in the technological structure and information technology fields over the past years.

–              OPEC reaches agreement to cut oil production first since 2008

OPEC has reached a deal amongst all 14 member countries to cut oil production to 32.5 million barrels a day for the first time since 2008. Member countries of the oil-producing cartel meeting at its headquarters in Vienna had secured a cut in its oil production from 33.8 million barrels a day (b/d) to 32.5 million b/d in an effort to prop up prices. Oil prices have fallen by more than half since mid-2014 due to global oversupply and booming U.S. shale production.

December

–              Dairy producer Obour Land starts trading on Egypt bourse

Egyptian dairy producer Obour Land have floated 40 percent stake that is equivalent to 80 million shares, started trading on Egypt’s bourse on December 15th.

Shares soared by 15 percent, reaching price level of 9.8 pounds with 5.5 million shares changed hands worth 52.4 million pounds.

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