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Egyptian Stock Exchange Develops EGX 30 Index Methodology

The Egyptian Stock Exchange (EGX). (Reuters)
The Egyptian Stock Exchange (EGX). (Reuters)
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Egyptian Stock Exchange Develops EGX 30 Index Methodology

The Egyptian Stock Exchange (EGX). (Reuters)
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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Venezuela Depreciation Risks Reversing Years of Inflation Gains

People walk through a market in the low-income Petare neighborhood, in Caracas, Venezuela November 16, 2024. (Reuters)
People walk through a market in the low-income Petare neighborhood, in Caracas, Venezuela November 16, 2024. (Reuters)
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Venezuela Depreciation Risks Reversing Years of Inflation Gains

People walk through a market in the low-income Petare neighborhood, in Caracas, Venezuela November 16, 2024. (Reuters)
People walk through a market in the low-income Petare neighborhood, in Caracas, Venezuela November 16, 2024. (Reuters)

Currency depreciation is set to reverse years of declining inflation in economically beleaguered Venezuela, public and private sector sources say, as foreign currency sales fall short of demand and the socialist government keeps tight-lipped about its strategy.

After years of hyperinflation and amid broad US sanctions, in 2022 the administration of President Nicolas Maduro began using orthodox policies including credit restrictions, lower public spending, a fixed dollar-bolivar rate and central bank sales of billions of dollars in foreign currency to tamp down consumer prices.

Maduro, who will begin his third term in January after a disputed election that the opposition and international observers say he lost, has said his government defeated inflation of more than 100,000% and prices in 2024 are similar to those in 2014.

But the administration's policy has now changed.

After more than nine months of the exchange rate being held at 36.5 bolivars to the dollar, the government in mid-October allowed the currency to float, beginning a depreciation that has seen the bolivar slide to about 45 versus the dollar, according to central bank figures.

Analysts say the over-valued currency made imports cheaper than locally-produced goods, impacting Venezuela's private sector and helping push prices up by 12% in nine months.

The untethering of the exchange rate will also put upward pressure on prices in the final quarter of 2024, financial and business sources said, with analysts predicting in a LatinFocus survey the rate will end the year at 50 bolivars to the dollar.

Year-on-year inflation was 25% through September. Official figures for October have not yet been released.

"For nine months the depreciation of the currency was zero while inflation was rising, which exposed problems in the exchange scheme," said economics professor and consultant Daniel Cadenas, who added the market depends on oil income. "For the system to function, there needs to be a growing source of exchange and that's not possible."

The government had predicted internally that inflation would close the year at 30%, two sources with knowledge of the projection said, but depreciation could increase the figure and local analysts have estimated inflation between 35% and 40%.

"There has been a necessary adjustment in the exchange rate that will have an impact on inflation," said Asdrubal Oliveros, head of local think tank Ecoanalitica. "The government has understood it needs to devaluate."

REDUCED CENTRAL BANK SALES

Vice President Delcy Rodriguez, who until recently also served as finance minister, told an event with business people last month that there must be "reflection" about the use of foreign exchange.

"We should all be concerned with how foreign exchange is used in imports. It is a subject the Finance Ministry is reviewing," she said. "We need to take care of foreign exchange because this is a blockaded country and there cannot be cheap exchange for hair dye."

Rodriguez's comments are the only ones made on the subject by the government since devaluation began. Neither the central bank nor the communications or finance ministries responded to requests for comment.

Private sector demand for cheap foreign exchange increased during the nine months the rate was held, even as the quantity of dollars being injected into the market by the central bank was reduced, sources said.

In July the bank was offering some $800 million, but by October that figure had fallen to $400 million, according to calculations by local consultancy Sintesis Financiera.

The central bank did not respond to a question about the reduction.

"The strategy in exchange policy is not going ahead," a government source said, without giving further details.

Food and medicine companies in Venezuela are allowed to pay for some of their goods with foreign currency, while other companies are given central bank promissory notes indexed to a specific exchange rate.

Two private sector sources said many businesses are eating through their inventories in the face of import difficulties.