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Sunday, 1 December 2019

EGX to reclassify constituent industries, add new sectors

EXCLUSIVE- EGX to reclassify constituent industries, add new sectors: The EGX is currently reviewing its classification system for the sectors of its constituent companies in a bid to both add new sectors and set a mechanism to better classify companies, a government official tells Enterprise. The bourse is looking to add new sectors in this review after determining investor interest in them and their importance to the economy, the source added without naming the sectors the bourse is looking to add. The review will be completed “soon,” we’re told.

Why does this matter? Setting aside active investors for a moment, tweaking industry offerings and classifications matters to passive investors who follow indexes and others who want to build and trade baskets of, say, healthcare shares in emerging markets or financial shares in MENA.

Adding new sectors could draw new attention from active regional investors who want to look at an industry holistically, says CIRA CEO Mohamed El Kalla. “That is why we are hoping education is among the new sectors that will be added to the bourse,” El Kalla told Enterprise. The move could help the government’s policy of ensuring that “qualified” and “serious” foreign investors enter strategic and sensitive sectors such as education, said El Kalla. He explains that the desire to ensure what he calls “qualified” investors is why the government moved to restrict foreign investment in Egyptian private schools to 20% — a move which caused backlash from the private sector.

How will multi-industry companies be treated? As part of the EGX’s review, a company that record revenue from activities across a wide spectrum of industries may be classified by the sector that makes the largest contribution to its top line.

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