Back to the complete issue
Sunday, 25 July 2021

Only 5 companies from each sector to be included in EGX after August rebalancing

A maximum of five companies operating in each sector will be included on the EGX30 index, under new regulations set to take effect at the start of August with the index’s latest rebalancing, the exchange said in a statement (pdf). The change aims to make the index more diverse and more representative of the market, the statement reads, with companies selected for inclusion based on their free float and volume of transactions. Companies must also have a minimum issued capital of EGP 100 mn or its equivalent in foreign currency. The EGX30 is reviewed (or “rebalanced”) twice a year, at the beginning of February and August.

The changes should improve diversity across the index, making it more attractive to investors, EGX boss Mohamed Farid said in the statement. The new conditions also bring EGX30 inclusion requirements more in line with general listing requirements — which also impose an EGP 100 mn minimum issued capital — said Prime Holding CEO Mohamed Maher, who sits on the EGX indexes committee.

How might this affect current constituents? The only two sectors at risk of being scaled down on the index seem to be real estate and non-banking financial services, which count at least six companies each as constituents of the EGX30. In the real estate sector, Emaar accounts for the smallest weighting of the index, at 0.67%, while Orascom Financial Holding comes in at 0.28% in the non-banking financial services sector.

The EGX30 had undergone changes to its inclusion criteria during its last rebalancing in February that were meant to make the EGX more attractive to foreign investors by giving more weight to companies with large market capitalizations. Under the new regulations, companies should have a freefloat market cap (the number of shares in freefloat multiplied by the share price) equal to or above the median average of the 60 most actively-traded companies. Constituents must also have a minimum 15% freefloat, be traded on at least 65% of trading days during the rebalancing period, and cannot have 30% of their shares or more in cross-holdings.

The last rebalancing in February saw payments giant Fawry, investment bank and NBFS player CI Capital, consumer stalwart MM Group, state-owned Abu Qir Fertilizers, and Alexandria Mineral Oils Company (AMOC) enter the EGX 30. Education outfit CIRA, dairy producer Juhayna, Egyptian Iron and Steel, clothing manufacturer Dice, and Beltone Financial Holding all left the benchmark index.

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. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.