The Stock Exchange added in a press statement today, Saturday, that the index includes the companies that make up the EGX30 index and the companies that make up the EGX70 EWI, noting the cancellation of the current index 100 EGX.
She said that this is in line with international best practices in the area of stock market indexes management.
She explained that the new index, which is considered a substitute for the 100 EGX index starting from January 2, 2006, was calculated with a value of 1000 points. Each company listed on the EGX 100 EWI index gets the same relative weight, which is about 1 percent in the first days of the periodic review.
The indicators committee of the Egyptian Stock Exchange also approved the modification of the methodology of listing companies in the indicators so that the companies that make up the EGX 100 EWI index, the EGX70 EWI index and the EWI EGX50 index are selected as applied in the main Egyptian stock index EGX30, to be implemented as of August 2020 .
The Stock Exchange confirmed that during its development of the EGX30 index methodology, it took into account the inclusion of companies that achieve high trading values on a monthly basis instead of considering the total trading values at the end of the review period every 6 months, which could include joining companies that achieve spikes in trading values, but in the form of Not continuous.
For his part, Mohamed Farid, head of the Egyptian Stock Exchange, said that the methodology for calculating the new index is one of the approaches followed by many international institutions that issue indicators that reflect the performance of the companies that make up the index in a more reflective of their price performance.
He continued: The new index provides the possibility of developing financial products such as index funds, as the new index is a good tool that investment institutions can target to issue investment funds that follow the index INDEX TRACKING, and the index is also in line with the requirements of workers in the market, especially the managers of investment funds who wish to have a benchmark Equal weights, which contributes to the promotion of its documents.
The new index, and talking to Farid, would help in enhancing the opportunities for growth and development of the investment funds industry by diversifying the investment options before them and enabling them to accurately measure the performance of their portfolios that target the index.
The Stock Exchange management held a dialogue with all the market actors on the new index, which concluded that the market needs a new index of equal weights, and the Stock Exchange completed the requirements of the technical structure and index tests on the electronic trading system, necessary for its final launch and scheduled for next Sunday, May 10, 2020.
This step comes in completion of the comprehensive development plan implemented by the Stock Exchange management on all its indicators, in order to develop the market tools and indicators, to meet the wishes of many actors in the Egyptian stock market.
The Egyptian Stock Exchange launched in February 2019, a new index, with specific weights, “EGX30 CAPPED”, which includes the 30 most active companies in terms of liquidity and activity, while the weighted market capital is determined by the percentage of free-floating shares, the weight of each company within the index, with a maximum of 15 percent for one company.
The “EGX30 Capped” index is characterized by being a specified weighter, as its rules set a maximum weight for each company within the index 15 percent upon the quarterly review of weights with the aim of limiting the control of a limited number of companies on the movement of the index in its entirety.
The EGX30 Capped methodology is consistent with the recent amendments to Chapter Three of the Executive Regulations of the Capital Market Law promulgated by Law No. 95 of 1992 regarding investment policies for investment funds.
The index’s methodology is consistent with Article 174 (the Fund’s investment policy) of Chapter Two (Mutual Funds) which states that “The percentage of what is invested in purchasing securities for one company shall not exceed 15 percent of the fund’s net assets and not exceeding 20 percent of the securities of that company” This is an update of Article No. 149 of Chapter Two (Investment Funds) of Chapter Three of the Executive Regulations of the Money Market Law promulgated by Law No. 95 of 1992.