Four axes to develop Egyptian stock exchange activities
Egypt, Economics, 3/12/2002

Despite the fact that the Egyptian stock exchange (ESE) was the magic gate for investments and making a fortune at the beginning of the l990s, yet these dreams turned into nightmare for junior investors and other categories who stormed this field to acquire quick gains. Their dreams evaporated with the big decline of 40-60 per cent in prices of many promising shares in the ESE.

This came in recent statements by chairman of Cairo and Alexandria stock exchanges Sameh al-Torgoman. However, he said, the ESE now rivals the London, Hong Kong and new York stock exchanges in terms of technological systems and legislation.

Al-Torgoman noted that stock exchanges are the mirror for the economy, adding that the experiment of the ESE which started six years ago witnessed some ups and downs, meaning that the stock exchange had not yet reached the stage of maturity. He said that the management of the stock exchanges in cooperation with the capital market authority (CMA) and the ministry of foreign trade have drawn up a plan for developing the ESE's activity. This plan depends on four axes: data system, legislative structure, human resources and raising awareness, he elaborated.

The ESE management has also introduced the rules of solvency rates for the brokerage companies in order to enhance their efficiency and boost their capability to shoulder risks through having a strong capital, he said. The past experiment showed that the brokerage companies faced big problem in the ease of markets' decline. Henceforth, competition sharpens among companies on commission and success was attained by big and strong establishments capable of offering new kinds of services, he added. Al-Torgoman expressed keenness to enhance these companies so that they may be capable of offering new kinds of services which increase liquidity on the market.

On the axis of legislation, he said this axis will be given wider attention in the upcoming stage, adding that a full-dressed system for settling conflicts has been reached, adding that the whole system will be reviewed in order to keep pace with latest world systems. In this context, a team from the New York stock exchange will visit Cairo to train the ESE staff, he said, adding that rules have been devised for solving problems when they emerge.

He further noted that the ESE has launched a campaign at both schools and universities for enhancing awareness of the stock exchange dealing system. The upcoming stage would witness more efforts for increasing transparency and expanding the rules of disclosure with the aim of enhancing liquidity, he said, adding that justice would be maintained through legislation and settlement of conflicts.

A1 Torgoman emphasized that the ESE development is a must, adding that this process has started from scratch as the ESE is now keeping abreast with world stock exchange dealings. He said foreigners' investments in the ESE range from 20-25 per cent, adding that this is an ineffective value, but the most important thing is that the psychological effect left by the foreigners on Egyptian investors would help reactivate the market.

On the ESE's latest indices, al-Torgoman, expounded the capital market rose to LE 112 billion on February 1st, adding that the registered companies scored a record number. He said aggregate purchases by foreigners amounted to LE 167.8 million whereas their sales amounted to LE 64.1 million.The plan for increasing liquidity depends on cooperation with the government banks, insurance companies and pension funds in order to expand their activities and dealings in stock exchange, al-Torgoman said.

He added that efforts are in place to prepare the market for issuing the shares of telecommunications and electricity companies in order to increase liquidity. The ESE will always expand cooperation with some strong companies in the Arab region, he added.

Studies are underway on linking some Arab stocks with these with the aim of encouraging transfer of capital, deepening the market and increasing liquidity, al-Torgoman concluded.

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