The Egyptian stock market maintained a robust performance throughout 2024, with key performance indicators such as the value and volume of transactions, market capitalisation, and the number of investors tapping the market for the first time all being reassuring.

Ahmed Al-Sheikh, chair of the Egyptian Stock Exchange (EGX), explained to Al-Ahram Weekly how the stock market will build on last year’s successes and his plans for upgrading the trading system, attracting new companies, and encouraging more investors.

What fed the historic highs that the Egyptian stock market saw in 2024?

Several factors contributed to this result, including political stability, the constructive engagement of all parties in the stock market ecosystem, and the concerted efforts of key entities, particularly the Financial Regulatory Authority (FRA). To sustain this upward trajectory in performance indicators and trading volumes, we are focused on attracting new companies for listing, encouraging the participation of new investors, resolving any challenges faced by market participants, maintaining balanced oversight, and continuously advancing the technological infrastructure.

How is the Egyptian Stock Exchange addressing the impact of global economic challenges such as inflation and rising interest rates?

The broader economic environment influences stock exchanges in different ways. The global surge in inflation may have positively impacted the EGX. Over the past two years, the stock market’s important role as a hedge against inflation has become increasingly evident. This is in addition to a defining advantage over other investment channels, which is high liquidity, a factor that has contributed to the marked rise in market indicators.

Developing the stock market infrastructure ranks high on your list of priorities. What is this meant to serve?

Infrastructure development remains a top priority. A contract has been signed with one of the world’s leading companies to implement a new trading system. The terms are currently being finalised, and it is expected to be enforced in early 2026.

The trading control systems are also being upgraded and incorporated into an integrated system and a mechanism to connect the EGX’s various sectors is being introduced. This system is slated for operation in the second quarter of 2026.

The new systems are meant to attract foreign investors and boost liquidity. In addition, the enhanced technological structure increases trade and liquidity and makes foreign investors familiar with our system, which is similar to international stock markets. This encourages them to tap into the Egyptian market.

We are also exploring the use of artificial intelligence and blockchain to improve transparency and market efficiency. This is currently being worked on at the Exchange’s CORBEH Innovation Centre.

What reasons do you have for delisting companies from the Exchange?

Delisting is a common phenomenon across global stock markets, often resulting from mergers or acquisitions. The EGX, however, is committed to retaining listed companies by addressing any challenges they may encounter. Moreover, we work to compensate for delistings by facilitating new listings. After all, compulsory delistings are limited and occur only after all other options to maintain the market’s balance have been exhausted.

There are various reasons for delisting. Some companies are delisted due to acquisitions, which, while reducing the number of listed companies and market capitalisation, can convey a positive message. Such delistings often reflect investor confidence in the EGX and its listed companies. This reinforces our position that foreign investors typically assess a country’s stock exchange and its listed companies as key indicators when considering investments.

Other delistings may occur for reasons related to the companies themselves, such as restructuring or local and global market conditions. These decisions are typically made by a company’s general assembly and are acceptable as long as they comply with the relevant laws and regulations.

How does the EGX deal with any reduction in the number of listed companies due to delisting?

The EGX prioritises the promotion of new listings. In 2024, we listed 11 new companies, alongside an additional listing resulting from a company division, all the while ensuring sectoral diversity.

We have also visited several of the governorates and engaged with members of Chambers of Commerce and business groups to explain the advantages of listing on the Stock Exchange and encouraged companies to join the market while mitigating any challenges they may face.

The response has been encouraging. A primary challenge, however, is that many companies operate as sole proprietorships or limited liability entities and not as joint-stock companies. To address this, we are collaborating with companies through our offices at the General Investment Authority, providing support to facilitate their legal transformation into joint-stock companies.

Is there a plan to reconsider mechanisms that have been criticised by individual traders, such as the auction system and trading by the millime, to improve the investment experience?

Who said these mechanisms are negative? Auctions are held in many markets globally and are being implemented here with a high degree of transparency and professionalism. Reasonable price limits have been established for stock price movements during auctions, and ongoing modifications are being implemented as part of the new trading system.

Trading in millimes for share prices less than LE1 has deepened the market. It allows for the closer alignment of supply and demand, positively impacting the performance of these securities and increasing transaction volumes. A further amendment to this mechanism is currently under consideration.

What have been the outcomes of cooperation with Egyptian universities in spreading financial literacy and expanding the investor base?

There has been a marked increase in the number of young investors, of whom 56 per cent are under the age of 30. More importantly, these efforts have heightened financial awareness and literacy among young people, equipping them to make suitable investment decisions.

What advice do you offer to small and medium-sized enterprises (SMEs) to ensure a successful transition from the secondary to the main market?

The key lies in having an ambitious yet practical business plan. Credibility is paramount. Companies must remain steadfast in achieving the goals they promise to the market and include in their listing prospectus.

What are your goals for 2025?

Our primary objective is to continue implementing the terms of the announced strategy. This involves advancing the technological infrastructure of the EGX and attracting new major companies to list, thereby maximising market value and maintaining the market’s classification in international indices.

In essence, the year will be focused on preparing trading systems for operation and promoting and executing the offerings programme.

Regarding the trading system, contracting and operationalisation typically take around 30 months. Having commenced this process in September 2023, the system is expected to be operational by early 2026. In order to promote these processes, we will launch cooperation with Chambers of Commerce and business groups, maintaining direct and continuous engagement with companies to explain the benefits of listing and to address challenges on the ground.

Additionally, the EGX has revamped its approach to initiating communication with companies. A promotion department has been established to reach as many companies as possible, while the listing sector now acts as an advisor to companies seeking to be listed.

What offerings are planned for this year?

The EGX is prepared to accommodate all offerings, with the matter currently being in the hands of the government.

We are eager to advance the government offerings programme while conducting intensive promotional efforts to attract private-sector companies. Accelerating the offerings programme will positively impact the performance of the EGX, as increasing the supply side is a central pillar of our strategy to enhance market depth.

Listing new, successful companies will undoubtedly contribute to boosting the EGX’s appeal to both Egyptian and international investors.

* A version of this article appears in print in the 16 January, 2025 edition of Al-Ahram Weekly