During 2014, the Egyptian stock market has witnessed major progress, whether through initial public offerings (IPOs) or through volume of trades. Thirteen companies were listed during the past year, with a total capital of EGP 1.9bn.
Daily News Egypt sat down with the chairman of Egyptian Stock Exchange (EGX) to discuss the performance of the capital market in 2015.
The Minister of Investment made some announcements about the reduction of the capital gains’ tax. Can you give us more details about that?
What I have read so far is that it is more related to the calculation of taxes and simplifying the procedures, with a specific way of implementation. I haven’t heard Information about whether it will increase or decrease.
How do you evaluate the performance of the exchange-traded funds (ETFs) so far?
It was a needed tool because one of its functions is to provide diversification. However, it is too early to say what the experience has produced. We need to be aware that ETFs were introduced at a time when the volume of trade was low, with an average of EGP 300m to EGP 400m (per day). It was expected to take time and therefore I can really evaluate its performance until at least six months after its introduction. The evaluation must be done when the conditions and circumstances of the capital market are within a normal range. Investors will be the ones to judge it through purchases and sales.
The latest report issued by EFG Hermes stated that volume of trade in the stock market can reach EGP 1bn per day. Do you foresee that?
I believe that there will be recovery in the volumes of trade with the new expected IPOs, along with the positive impact of the Economic Summit. Many are waiting to see the summit and the deals expected after it. Holding the conference will be of high importance, however, following up on the results of the summit has the same level of importance. I am expecting a recovery in the volume of trade in relation to the liquidity present in the market and new products.
What will be the role of EGX in the Economic Summit?
I believe we have a very important role in this conference. The investor passes through three phases; the entry, the expansion, which might or might not happen, and the exit. Any investor is interested to know clearly how he would exit the country. When investors come to Egypt and look for finances, they can either go and get bank loans or get to the capital market to demand equity. Our role is to reassure investors that Egypt has a strong and competent capital market that functions effectively.
Your latest visit prior to the conference was to London. Are the investors welcoming to the Egyptian stock market?
Investors are very welcoming and positive. Investors do not mind taxes; however, they need to have a clear simple mandate to the application of these taxes. Foreigner investors pay taxes, either here or in their countries, and their concerns are mainly about its clearance and the way it is applied. They care about the guarantees of the investments incentives offered and profits’ transfers. They also care about the monetary policies taken and the growth rates.
What about the possibility that public companies might be listed and have IPOs in the market?
The public owns these companies and the government manages them. The stock market also follows the sates however during the past 10 years; all who benefited from these companies were the private companies. The question here is that the stock market has an essential role in helping companies get financing when it needs it. Many public companies need to develop and expand to other facilities and the stock market gave provide the finances to do that. Some people say that this is privatisation. There is a difference, however, between selling existing shares and increasing capitals. The company doesn’t sell their shares in the market but rather increase the capital and allow the public to share and participate. All IPOs in public companies will be through capital increase.
Minister of Supply Khaled Hanafy announced that the ministry is studying listing Food Industries Holding Company (FIHC) in the stock market? Was there a specific date agreed upon?
We have not yet agreed on timing. My role is to clarify to the official the importance of the presence of these companies in the market. Listing in the stock market puts the company under a monitoring system [with regular disclosures]. The public can witness the performance of these companies. Some see listing as a burden due to the disclosures, regulations, documents needed and financial records but that helps the company improve in the company’s state.