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The EGX to launch its index in early August: The Egyptian Exchange (EGX) plans to launch the low-volatility index EGX35-LV as part of its strategy to diversify investment tools and attract investors, according to a statement seen by EnterpriseAM. The new index will officially go live in early August.
A look at the index: The EGX35-LV will include the 35 companies with the lowest price volatility from the most liquid stocks in the market, selected from those listed on the broader EGX100 index. The index will span 13 sectors.
The chosen 35: Topping the list is CIB with the highest relative weight at 4.26%, then there’s Telecom Egypt, Eipico, CIRA Education, Egyptian Kuwaiti Holding, Housing and Development Bank, Misr Fertilizers Production Company (Mopco), Madinet Masr, Orascom Construction, and Edita Food Industries. You can check out the full list (pdf) on the EGX’s website.
Why those companies specifically? The stocks were chosen after the EGX calculated their price volatility over a year-long period, according to the statement. The relative weight of the index's components was determined by each stock's price volatility, with the least volatile stocks receiving the highest relative weight, advisor to the EGX chairman Ayman Farouk told EnterpriseAM.
“The new index is expected to help attract individual and institutional investors who prefer more stable and less volatile investments. It also enables investors to diversify their portfolios, thereby enhancing the depth and diversity of the Egyptian market,” EGX head Ahmed El Sheikh said in the statement. The EGX's move to launch this index will help attract the segment of risk-averse investors who prefer long-term investment, Rania Yacoub, a member of the EGX board, told EnterpriseAM. This index could help increase market liquidity or redirect it from some stocks to others, Yacoub told us.
Could we see investment funds tracking this index? The EGX has received a positive reception for the new index, including from some asset management firms that could apply to launch index-tracking funds after its launch, Farouk said. Mubasher Capital may launch a fund that tracks this index as part of its plan to launch ten new funds, depending on market conditions, Vice Chairman Ehab Rashad told EnterpriseAM.
The index may not be attractive to foreign investors, seeing as this category of investors typically has a pre-planned strategy for timing their investments and exits based on market data, including the exchange rate and global market prices, Rashad said.
More indices are on the way: The EGX is currently in discussions with S&P to finalize preparations to launch a sustainability index or an independent index through the EGX's internal departments, El Sheikh told Hapi Journal.
