REGULATION WATCH- EGX completes reclassification of constituent industries, changing 42 companies’ industry classification: The EGX has completed its review of its classification system for the sectors of its constituent companies, according to a statement (pdf). The new system, which the EGX designed to be in line with international practices, will come into effect as of 2020.

What has changed? The review saw the bourse add one new industry, bringing the total number of industries to 18, and change the classification of 42 companies. Another 53 companies saw the name of their respective industries changed, either by merging two industries together, splitting one industry into more specific subsets, or altering the name. According to the statement, companies that record revenues from activities across a wide spectrum of industries are now classified by the sector that makes the largest contribution to its top line, among other factors. For example, Orascom Development is currently classified under tourism and entertainment but will be classified under real estate with the new system. Of the 244 EGX-listed companies, 35 are listed under the real estate industry, making it the sector with the largest number of members.

Education became the 18th industry in the bourse’s classification system, answering the prayers of many industry leaders, including CIRA CEO Mohamed El Kalla. Adding education as a standalone industry could help ensure that “qualified” and “serious” foreign investors enter the sector, which is a state priority and is the reason the government moved to restrict foreign investment in Egyptian private schools to 20%, El Kalla told us earlier this month.

Why does this matter? The changes are meant to create a system that more accurately reflects the activities of listed companies, therefore allowing passive investors to better track indexes and industry-specific performance. Foreign investors looking to build a basket of shares in a certain industry will also have an easier time with the new system, the statement says. The move also paves the way for the EGX to roll out new financial instruments related to specific industries.