EGX Chairman Dr. Mohamed Omran said the move was made to fully activate the exchange, on which 24 small and medium sized companies currently trade, after it changed from using an auction to a regular trading system in November 2011, providing the necessary tools to measure its performance and to increase its competitiveness in response to rising investor appetite. The exchange itself was launched in 2008.
The new index will follow the country’s benchmark EGX 30 index in adjusting market capitalization via a free float methodology, but will include only the most active companies, selected in terms of value, during the audit period.
It will also exclude any companies with a free float of less than 10 percent and those that have picked up more than three violations of disclosure rules, as well as any companies recording losses for a period of three consecutive years.
The new index will be counted retrospectively from July 2, 2012 at 1,000 points. It has since then grown 15.7 percent to reach 1,156.8 points by the end of 2013. The EGX 30 grew 37 percent during the same period.
The index was previously open for trading for one hour a day only, but the decision was taken in October 2013 to increase that to four. Omran said this has had a significant impact on the development of the index, which recorded growth levels of 18.3 percent from October 3, 2013, when the changes took effect, to December 31, 2013—just shy of the 18.9 percent recorded by the EGX 30 during the same period.
This comes as markets in Egypt were left reeling on Sunday, with the EGX 30 dropping 0.22 percent to reach 7,217.82 points, following a turbulent last few days that have seen four terrorist attacks hit Cairo and the country’s third anniversary of the January 25 revolution marred by violence, which left 49 dead after clashes between anti-government protesters and security forces.
The EGX lost 1.2 billion Egyptian pounds (172.6 US dollars) on Sunday following the events, canceling out a gain of 990 million pounds (142.4 million dollars) last week, which came close on the heels of the country’s referendum being approved earlier this month.