How does the decision to amend the temporary suspension limits affect the performance of the Egyptian Stock Exchange? Experts explain

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Mubasher – Heba Al-Kurdi: After the violent decline session that the Egyptian Stock Exchange witnessed yesterday, Tuesday, which led to the suspension of the trading session according to the rules, the Egyptian Stock Exchange decided to amend the temporary suspension limits to stop trading on the market as a whole when the EGX100 index fell by 10% instead of 5%.

The opinions of financial market experts differed about the impact of the decision on the market. The majority sees that the decision is positive and goes in the direction of the stock market towards development, and the other side sees that it deepens losses in cases of panic and sharp declines.

The Board of Directors of the Egyptian Stock Exchange, in coordination with the Financial Supervisory Authority, decided to amend the temporary suspension limits on the general index of the market to stop trading on the market as a whole when the EGX100 index fell by 10% instead of 5%, and agreed to stop it until the end of the trading session when it fell by 20 % instead of 10%, instead of the current rates, in line with adjusting the price limits on the same shares, as of today’s trading session.

Yesterday, the Egyptian Stock Exchange was subjected to a violent decline, which led to a decline in the percentage index “the new EGX 100 of equal weights” by about 5%, and the temporary suspension of trading in the Egyptian Stock Exchange, a matter that financial market analysts attributed to “Mubasher” to the decision to stop some dealers’ codes.

Positive effect

For his part, Hossam Eid, investment manager at International Securities, told Mubasher that it is a positive decision, but it came too late, explaining that the decision has a significant positive impact on the performance of the Egyptian stock market indices during the coming period.

Eid believes that the decision will give an opportunity to recover in the event of a sharp decline, and this is what happened in today’s session, compared to yesterday’s session, which witnessed a violent decline before trading stopped for half an hour as the egx100 index exceeded 5%.

According to a recent research note, investment bank Beltone believes that these amendments are positive; It reflects the stability and strength of the Egyptian Stock Exchange and its insistence on completing what it started in the development procedures implemented on shares in September 2021.

Beltone stated that adjusting the temporary suspension limits will play an important and vital role in controlling price fluctuations and stabilizing the securities settlement system, which will help increase trading volumes on the Egyptian Stock Exchange.

Beltone also expected that the stop limits in the long term will help reduce the levels of market volatility in times of declining liquidity in the market.

Deepening the retreat

On the other hand, Ayman Fouda, head of the Capital Market Committee of the African Council, believes that the timing of the decision, in light of the large declines witnessed by the market yesterday, is negative, as it allows the index to drop by up to 10% without stopping the bleeding of declines in the case of the Panic.

He continued, “The decision allows the continuation of the decline during the banik, without explaining to the dealers the reasons for the decline and its dimensions, to review and stop their position on unjustified sales.”

He stated that this decision is only for the decline side, as the market will not reach the maximum price limits except in cases of panic or sharp decline, as happened in the events of January 2011, and in the midst of the Corona pandemic.

On his part, Tamer Al-Saeed, a financial market expert, said that after changing the stock’s suspension limit on the EGX100 index from 5% up to 10%, the market’s decline intensified, as it was officially announced during today’s trading session, after achieving losses that exceeded 5% below previously announced.

He continued: “This led to the reservation of many observers and investors, and increased new pressures on the market until the main index reached the area of ​​11061 points, after which it rebounded until it closed at 11,132 points, achieving a decrease of 62 points.

He pointed out that the biggest decline was on the EGX70 and EGX100 indices, as their decline intensified until it crossed more than 5% during the trading session, and at the end of the session it reduced some of the declines therein.

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