CAIRO: An EGX 30 index reshuffle, where eight companies will be dropped and replaced by another eight, will come into effect starting August, a statement released Wednesday said.
This represents the first major decision made by the bourse’s new chairman, Khaled Serry Siam, who recently took over the reigns on June 15.
Siam was previously the deputy of the Egyptian Financial Supervisory Authority as well as the former president of the Capital Market Authority.
According to a Reuters report, the exchange also said it will replace 18 firms from the EGX 70 with the same number.
The new changes to the index were characterized as “surprising” by Amr Alla, team head of local institution desk at Prime Securities, a Cairo-based investment firm.
In Alla’s estimation, several small-medium cap and retail cap funds were added to the list, which was unexpected, referring specifically to Egyptian Media Production City Company and the National Real Estate Bank for Development.
The additions of Citadel Capital and Sidi Kerir Petrochemicals, he said, were in line with general expectations, since they are bigger funds with robust liquidity.
The removal of Nasr City Housing, although a larger fund, did not come as a shock to Alla, who said “they have not been showing much liquidity most of the time.”
Mostafa Abdel Aziz, head of regional trading desk at Beltone Financial, a Cairo-based investment firm, reacted somewhat differently, citing Ajwa Food Industries and Egyptian Development for Building Materials as companies he did not expect to be added to the index.
He did, however, agree with Alla regarding National Real Estate Bank for Development as an unexpected addition.
Aziz said Nasr City Housing, despite being a quality stock overall, has shown “poor liquidity.”
The new additions, he concurred, were largely retail and small cap funds, and further added that these new additions are not followed by the main research houses. “These are mostly speculative stocks,” he pointed out.
In Aziz’s estimation of the companies that were removed, “there were no surprises.”
Explaining why these changes occurred, which he pointed out as being a normal process, Aziz said that increases and decreases in a company’s volume was the explanatory factor.
The implications of the changes to the EGX as a whole will not translate into any “big reactions,” Alla affirmed.
Nevertheless, he continued, this week’s modifications “represent a big surprise for everyone.”
Some of the decisions were a bit “strange,” but “nothing devastating.”
Alla also commented that direction of the decision taken yesterday was a reflection of the new chairman’s approach, which contrasts somewhat from outgoing chairman Maged Shawky.
Shawky took decisions that “made retail investors weary of investing,” he noted. A significant portion of the market is constituted of retail investors, so if they are negatively impacted, it has a big effect on the market, he added.
The former chairman came into the spotlight after being replaced, with reports of his being investigated for "taking decisions that violated market regulations during the recent collapse of the stock market, [in turn] negatively affecting the Egyptian economy.”
Firms to be added to the EGX 30:
Sidi Kerir Petrochemicals
Citadel Capital
Remco for Touristic Villages Construction
Egyptian Development for Building Materials
Ajwa Food Industries
National Company for Maize Production
Egyptian Media Production City Company
National Real Estate Bank for Development
Firms to be dropped from the EGX 30:
Nasr City Housing
International Agricultural Products
Alexandria Spinning and Weaving (Spinalex)
El Nasr Clothing and Textile Co (Kabo)
Nile Cotton Ginning
Ahly Development and Investment
Egyptian Housing and Development
Egyptian Financial and Industrial Corporation (EFIC)
