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Egyptian Stock Exchange Develops EGX 30 Index Methodology

Egyptian Stock Exchange Develops EGX 30 Index Methodology

Monday, 19 July, 2021 - 10:00
The Egyptian Stock Exchange (EGX). (Reuters)

The Egyptian Stock Exchange (EGX) approved the development of the EGX30 index methodology for index formation and criteria for listing companies.

It also added a new standard for listing companies in the rest of the indices in the primary market so that the index conforms to the listing rules while maintaining its stability.

EGX issued a press release announcing that this step comes in light of the continuous development of indicators’ methodologies and their suitability to international best practices.

The statement said the new methodology is based on setting a maximum number of companies from the same sector, not to exceed five companies, contributing to diversifying the industries that make up the market indices to reflect the circulation and market performance comprehensively.

It also included setting a minimum limit for the company’s issued capital to be listed in the leading market indices.

It is required that the company’s issued capital to be fully paid, no less than EGP100 million or its equivalent in foreign currencies, based on the latest annual or periodic financial statements accompanied by a comprehensive audit report and certified by the company’s general assembly.

Chairman of EGX, Mohamed Farid Saleh said that developing the methodology aims to integrate with the listing rules and achieve more stability for market indices, enhance investment attractiveness and contribute to improving the diversification rates of the sectors that make up the index in line with international best practices.

The new methodology will be applied during the current review process in early August.

CEO of Azimut Egypt and EGX board member Ahmed Abou el-Saad noted that the development of the indicators’ methodology had witnessed massive efforts to correct any distortions during the last stages.

He explained that indices are significant markers for the company’s performance, which is reflected in the quality of the companies that join the index.

Mohamed El-Saiid, Executive Director and Head of Technical Analysis at HC Securities and Investment, explained that the continuous development of the methodology of EGX indices is undoubtedly significant.

He noted that it adds and ensures a more excellent and more comprehensive representation of the market through indices of all kinds.

The main criterion for selecting the constituents of the index is liquidity. A buffer rule is applied to the constituent selection process at each rebalancing to reduce turnover.

The company is considered eligible for inclusion in the index if its adjusted market capitalization is not less than the median of the adjusted market capitalization of the top 60 traded companies ranked as per the liquidity screening.

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