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Sunday, 11 April 2021

Secondary bond market to be opened to retail investors

The EGX30 rose 0.9% at today’s close on turnover of EGP 749 mn (46.1% below the 90-day average). Foreign investors were net sellers. The index is down 4.2% YTD.

In the green: GB Auto (+8.6%), Fawry (+6.4%) and Export Development Bank (+3.9%).

In the red: Eastern Co. (-1.7%), Abu Qir Fertilizers (-1.2%) and EKH (-1.0%).

REGULATION WATCH- Bond listings on the EGX are now subject to new rules that could encourage wider participation from retail investors. The rules require issuers tapping the secondary market to allocate at least 10% to retail investors and companies that won’t be bound by a minimum buy-in, Financial Regulatory Authority Deputy Chairman Islam Azzam said, according to Masrawy. Institutional investors are subject to a minimum 1% or EGP 10 mn buy-ins to participate in bond placements and high-net-worth investors need to snap up at least 0.5% or EGP 1 mn, whichever is smaller. Exempting smaller players from this would allow them to take part in placements, widening the investor base, Azzam says.

How could it work? Regular folks will likely be able to invest savings in bonds traded on the secondary market through term deposits at their banks, Prime Holding senior economist Mona Bedeir tells us. It could work in the same way the National Bank of Egypt allows its customers to own government bonds and treasuries, she adds.

A case of ‘if you build it, they will come’? It’s a good first step to channel more savings to private borrowers, and one which will test the extent to which non-traditional investors are willing to invest in bonds, Bedeir told Enterprise. If the new minimum succeeds in attracting more investors to the secondary market, there would be scope to increase it above 10%, she added, noting that the move is a litmus test for the bond market.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2021 Enterprise Ventures LLC.