The Egyptian stock market ended in the black in most 2024 trading sessions, with gauges measuring market performance seeing new records throughout the year.
These included market capitalisation, which reached LE2.17 trillion, LE450 billion higher than its level at the beginning of the year. The overall value of transactions, including shares, bonds and treasuries, reached LE14.3 trillion compared to LE3 trillion at the end of 2023.
All the market indices showed increases that ranged between 19 per cent for the EGX30, the main market index, and up to 48 per cent realised by the EGX70 index.
High inflation rates, one of the main problems facing the Egyptian economy, were one of the main drivers of the market’s robust performance during the year, and stock market investors used traded shares as a hedge against the depreciation in the value of the pound.
The devaluation that took place in March last year has made stock market investments even more affordable for investors.
Though declining over the last three months to hover around 25 per cent, the first four months of the year saw inflation rates exceeding 30 per cent, fed by reforms that included cutting fuel and bread subsidies.
The Central Bank of Egypt (CBE) allowed the pound/dollar exchange rate to be determined by market forces in March, leading the pound to lose 40 per cent of its value to hover at LE47 to LE50 for the rest of the year compared to LE30 at the beginning of 2024.
On the same day, the CBE introduced a mammoth six per cent increase in interest rates followed by another two per cent increase later. The higher interest rate together with the depreciating pound attracted more foreign portfolio investments, pushing the percentage of foreign holdings of Egyptian-issued treasury bills to 50 per cent.
Egypt opened the door to trading treasury bills in the market in September 2023. This was one of the main factors behind the large increase in the overall value of transactions to reach LE14.3 trillion.
“Portfolio investments into Egypt have been bolstered by purchases by foreign investors of locally-issued treasury bills, and foreign investors are now the majority holders of Egypt’s local debt,” said London-based consultancy Capital Economics.
Foreign investors’ appetite for Egyptian government debt has been supported by a combination of the weaker pound (making the bonds cheaper in foreign currency terms), high yields on the back of aggressive monetary tightening, and increased foreign-exchange reserves easing fears of a sovereign default, it explained.
The foreign (including Arab) share of overall market transactions doubled during the year to reach 20 per cent.
The market received the news of the devaluation and of the Ras Al-Hekma real-estate deal that swiftly followed warmly to reach its highest-ever level at 33,382 points in March, just a few days after the devaluation.
The lowest point was in April amid rumours that the stock market was about to see a capital gains tax imposed on transactions. Things improved after the government clarified that it would not start collecting taxes on capital gains realised from trading listed securities before March-April 2025.
The tax was supposed to be enforced in 2022 but had been postponed several times due to worries that it might be detrimental to the investment appeal of the market. There are ongoing talks about the possible scraping of the tax and its replacement with a stamp tax.
Despite the announcements of plans to offer shares in state-owned companies through the stock market, only the United Bank of Egypt was privatised. Thirty per cent of the Bank was offered to investors, with the bulk sold through private placement.
The initial public offering (IPO) of the bank, which comprised five per cent of the offered stake, was snatched up in the local market to close at 59 times oversubscribed and showing the market’s thirst for IPOs.
The only other IPO during the year was for a private company. Act Financial began trading in late July after offering a 32 per cent stake to investors. The IPO tranche of the offering was 54.8 times oversubscribed.
The year also witnessed the introduction of a new Sharia-compliant index dubbed the EGX33 to cater for investors looking for investments that meet the rules of Islamic business models.
At least 90 per cent of the revenues of the index’s listed companies should emerge from Sharia-compliant sources, which do not include revenues as a result of charging interest or from selling alcohol or cigarettes.
The index includes 33 companies, with the Talaat Moustafa Group, Al-Sewedy Electric, and Abu Qir Fertilisers having the highest weighting. Since its inception in mid-June and up until the end of 2024, the EGX33 increased by 36 per cent.
Another important development that took place in 2024 was the launch of Africa’s first carbon market, where companies can issue and trade voluntary carbon certificates that can be purchased by other companies wanting to offset their emissions.
On the regulatory level, the Financial Regulatory Authority, the market regulator, introduced new regulations on listing and delisting in the market. 2024 saw the listing of 11 new companies. Integrated Diagnostics Holdings (IDH) was delisted during the year due to limited trading activity. Ezz Steel is also working to delist its shares.
The Egyptian Stock Exchange has set out many plans for 2025, topped by the introduction of a new trading system. However, what most market observers are waiting for is the injection of new blood into the market with the long list of planned IPOs.
* A version of this article appears in print in the 16 January, 2025 edition of Al-Ahram Weekly
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