Foreign and regional investor confidence in the Egyptian economy continues to grow. st The Egyptian Exchange’s (EGX) benchmark index reached 9,958 points, the highest level in seven years . The index last reached this level in February 2008, before rising to an all time high of 11,936 points in May 2008. Trading volume surged as well in 2014, reaching 57 billion securities, doubling from 2013 levels.
The Egyptian stock market was the best performing market in 2014 tracked by Morgan Stanley Capital International (MSCI), registering returns of 31%. The EGX also outperformed the MSCI Emerging Markets Index performance in 2014, with the former rising 32%, compared to a 5% decline in the MSCI emerging markets index. Stock market indicators are leading indicators signaling better performance in the economy as a whole in the near future. Indices’ better performance reflects the improved conditions of companies, existing and future, and investors’ ability to trade the market better in a more conducive economic environment.
“The EGX was positively recognized by a number of institutions for developments in 2014”, stated Dr. Mohammed Omran, the Chairman of the EGX. Africa Investor announced the EGX the Most Innovative Stock Exchange in Africa in 2014. Egypt’s ranking in the World Bank’s Doing Business report improved as a result of the related party transactions requirements that were added to the Listing &Disclosure rules, and the Financial Times named Egypt the best destination for stock market investors in 2014.
“Another equally important development was the surge in capital increases, which jumped in 2014 to EGP9.3 billion, the highest record since 2011”, said Dr. Omran, adding that “72 listed companies applied for capital increases in 2014, indicating that almost 30% of listed companies had expansionary plans, reflecting expectations of improved economic conditions”.
“This year also witnessed the return of investors’ appetite for the first time since 2010, with a large IPO of a cement company being over-subscribed over 18 times, reflecting more investor confidence”, said the EGX Chairman. Foreign investors’ trading averaged EGP40 billion in 2014, up from EGP24 billion in 2013, realizing net equity inflows of EGP3.4 billion in 2014; the first time that foreigners registered net inflows since the 2011 revolution.
The EGX is one of the institutions operating within the scope of the Ministry of Investment, overseeing non-banking financial services, together with the Egyptian Financial Supervisory Authority (EFSA). In another indicator of ongoing business confidence in Egypt, Kuwaiti-based Al-Kharafi Group announced it would build a Mitsubishi assembly plant in Qena, Egypt, and invest in the country’s planned administrative capital, which will be built outside of Cairo. Al-Kharafi Group’s announcement follows significant investments in either the Egyptian market or Egyptian businesses over the last month by Nestle, Kellogg’s, Vodafone and other multinational firms.
“We are encouraged by the increasing support of the Egyptian economy and the economic vision of the Egyptian government from businesses and investors,” said Minister of Investment, Mr. Ashraf Salman. “This partnership will only grow as we unveil additional pro-business reforms and investment opportunities in the coming months.”
The rising stock market and notable investment are welcome signs for organizers of the Egypt Economic Development Conference (EEDC), to be hosted by President Abdel Fattah El-Sisi on 13-15 March in Sharm el-Sheikh. The conference is part of an ambitious reform programme to restructure and transform the country’s economic base by improving productivity and encouraging private sector-led growth .
An economic turnaround has started to materialise in Egypt with a 6.8 per cent growth rate in the first quarter of the current fiscal year. The Egyptian government expects the growth rate for this year to be at least 4 per cent above its initial target. This progress has been recognized with positive ratings from international rating agencies, the IMF and World Bank, among others.
This positive momentum is widely interpreted as being indicative of reforms underway, including the approval of new mining and micro-finance laws, the repayment of arrears in the energy sector and the implementation of a more flexible exchange rate policy. Other reforms are in the pipeline, and are expected to be announced before the EEDC include a new investment law, a new land management framework, amendments to the companies and electricity laws, new sector action plans to finally harness the growth potential on a micro level, all of which are all designed to create a business friendly investment climate and encourage domestic and foreign investments.