EGX finalizes periodic review for its indices to be effective August 1

CAIRO – 28 July 2021: the Egyptian Exchange (EGX) announced Wednesday the quarterly periodic review of the indicators during July.

It stated that the review witnessed many changes, with the main index EGX30, EGX30 Capped index and EGX30 TR index, had 7 companies exiting and another 6 joining.  The EGX50 EWI also had 15 companies excluded and 14 joining, while the EGX70 had 23 companies exiting, while the EGX100 had 18 companies excluded and 16 joining.

EGX’s Indices committee announced the development of the market indicators methodology last week, adopting the methodology of companies to join EGX30 index, the modified methodology requires a maximum number of inclusion companies from the same sector as the number of included companies from the same sector should not exceed five companies. The selection of companies based on adjusted free float market capitalization, contributing to greater diversity for the sectors that make up market indicators to reflect the movements and performance of the market comprehensively.

The development also included a minimum limit on the company's export capital to include the main market indicators, where the issuing capital of the company is required to be compatible with the text associated with the value of capital to include in the main market article 6 article (7) of listing rules, which stipulates that " Issued capital must be fully paid and not less than LE 100 million or their equivalent in a foreign currency according to the last annual or periodic financial statement, attached to it the company's exhaustive auditor report as approved by the company's general assembly."

While the application of the new methodology during the last review, resulted in achieving targets, including improving the diversification rates of the sectors that make up the index, where only 5 companies were included from the real estate sector instead of 8 companies as well as 5 companies from the non-banking financial services sector instead of 6 companies if the new standard was not applied, as well as the exclusion of about 17 companies with export capital less than LE 100 million as a condition of listing in the main market of the total indicators.

In January 2021, EGX developed its EGX30 methodology, adding the market capital standard weighted by free float, "the value of market capital weighted by the free float of companies eligible to join the index on the date of periodic review was added, than the broker's value of market capital weighted by free-float of the top 60 companies in terms of "liquidity", in order to ensure good representation of large-sized companies that enjoy high liquidity, and to maintains the attractiveness of the index to invest locally and globally.  Also to achieve greater stability in the components of the index and reduce the change of a large number of companies in the single review in line with global best practices, where companies will be ranked in terms of "liquidity" to be up to all criteria for joining the index, followed by the application of a rule, (Buffer Rule), a rule that enhances the stability of the components of the index, which is the methodology used in major institutions that issue global indicators.

The application of the new methodology during the periodic review in January 2021 resulted in the relative weight of the largest EGX 30 companies falling from about 44.42 percent if the new methodology was not applied, to 36.81 percent, following the introduction of the new methodology, which contributed to improving the relative distribution of companies within the index.