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Capital Markets in Egypt

Capital Markets in Egypt. Some personal thoughts: Yosuke KAWAKAMI, DAF. History & infra: Relatively Old & Well-developed. CASE: Among oldest exchanges in region - Alexandria: established 1883, Cairo: 1903 - ranked 5 th in the world in1940s However, capital markets languished post WW2

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Capital Markets in Egypt

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  1. Capital Markets in Egypt Some personal thoughts: Yosuke KAWAKAMI, DAF

  2. History & infra: Relatively Old & Well-developed • CASE: Among oldest exchanges in region - Alexandria: established 1883, Cairo: 1903 - ranked 5th in the world in1940s • However, capital markets languished post WW2 - central planning and nationalization during 1950’s -60’s • CMA: established in late 1970’s • 1991: Start of economic reforms • 1992: Capital Market Law • 1994: Start of privatization

  3. Recent Macro & Structural Reforms have led to Capital Market Development • Macroeconomic Stabilization & Improved Performance - Transition to unified flexible FX rate regime (Dec.2004) -- subsequent stabilization - strengthened external position • Structural Reforms - Privatization - Financial Market Reform -- Recent capital market reforms: e.g. automated trading, primary dealership, “One-stop Shop”

  4. Stock Market: 2nd in size among MENA • CASE index: 3-fold rise from end-2004 to early-2006 • Market value: 70% of GDP (as of Sept. 2005) --- doubled in two years • However, market fragile: 16% drop on 14 March 2006 • Have withstood recent MENA downturns better

  5. Some Outstanding/Remaining Issues (1) • Bond market: less developed • Stock Market Structure - concentration of capitalization & trading -- largest 10-20 firms dominate - concentration of ownership / low free float

  6. Some Outstanding/Remaining Issues (2) • Institutional Issues - Corporate governance -- development of CG Code & Guidelines for CG of SOEs -- establishment of Institute of Directors - Strengthening insider-trading rules - Derivative instruments: provide hedging tools & help increase liquidity -- general principles of law provide legal basis (although no specific legal framework exist under Egyptian law)

  7. Some Outstanding/Remaining Issues (3) • Capital Market Promotion & Development - Promoting privatized share sales to general public - Promoting development of institutional investors -- further reform of insurance & pension sectors useful - MBS (ABS) development -- conversion of mortgages (which the gov't is promoting)

  8. Thank you!

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