Does the Egyptian stock market crisis reflect the state of the country’s economy?

Farid added that this is in addition to the package of decisions issued by the government less than two months ago and is expected to bear fruit in the long term, not the short term, adding that the revival is not the sole responsibility of the stock exchange. is not. , because it’s just the trading platform.

Last November, the Egyptian government issued decisions focused on reducing some taxes and fees, including canceling the stamp duty for the resident investor, deducting trading expenses and retaining shares of the tax base.

The “EGX 30” index measures the performance of the top 30 companies on the Egyptian Stock Exchange in terms of liquidity and activity.

Financial analysts believe that the rise in this major index does not necessarily reflect the reality of the stock market, as there is a sectoral concentration in the index.

The banking sector represents more than a quarter of the market capitalization volume in the “EGX30” index, while the second quarter represents the basic resources, communications and technology sectors, and the other half of the index includes the remaining 16 sectors.

Adviser to the Egyptian Minister of Supply and Internal Trade for Corporate Development, Dr. Medhat Nafeh, points out that certain sectors dominate the index, and that the banking sector, which dominates more than a quarter, does not itself include several prominent banks in Egypt. .

The Egyptian Stock Exchange intends to launch a new index of “EGX 30” of equal weights next year.

Nafeh, who previously worked as head of the supervisory, risk management and indicator sector in the Egyptian stock exchange, attributes the cause of the stock market crisis to what he calls the FRA’s dominance of its oversight role by interfering with market mechanisms by canceling and stopping operations codes repeatedly.

Nafeh explains that it scares investors, in addition to the instability caused by changing some rules during a trading session.

The board of directors of the Egyptian Stock Exchange issued a decision last September on the amendment of the minimum value set for the closing price during the ongoing trading and auction sessions, and the decision was implemented on the same day.

But the Chairman of the Board of the Egyptian Stock Exchange, Dr. Commenting on this, Mohamed Farid said: “The amendment was based on the demands of investors to implement the auction mechanism with regard to closing prices in line with most trades. platforms in the world. ”

Nafeh says the stock market, with all these problems, no longer reflects the reality of the Egyptian economy because it does not keep pace with the rates of low unemployment and inflation, and the increase in market capital does not match the rise in GDP.

The so-called economic reform program that Egypt has implemented for several years has led to a clear increase in indicators that measure the performance of the Egyptian economy, such as the gross domestic product, which reached $ 408 billion at the end of the last financial year, which refers to the value of all goods and services produced within the country during a certain period. And the growth rate, which reached 3.3 percent, despite the ongoing repercussions of the Corona epidemic.

Hani Tawfik, former head of the Egyptian and Arab Direct Investment Societies, disagrees with this view, as he believes that “the stock market crisis is a reflection of the crisis of the private sector in Egypt.”

Tawfik explains to the BBC that there is competition from the state with the private sector, which is causing it to shrink and arouse a feeling among investors that the sensor has become a competitor.

Despite the absence of any official statistics, specialists believe that the role of companies owned by the Egyptian government and the armed forces in the Egyptian economy has increased significantly in recent years, by the Egyptian authorities on a number of occasions. denied, according to several Egyptian officials, led by Egyptian President Abdel Fattah el-Sisi.

At the end of last year, the World Bank described the country’s commercial expansion as “excessive” and said that the private sector was prevented from playing a greater role in supporting the Egyptian economy, despite major economic reforms in recent years.

Tawfik says the private sector is already facing several problems in Egypt, including the cost of taxes, fees and bureaucracy, the slow pace of litigation procedures, the constant change of laws and the exchange rate of the pound against the dollar, which does offer not big profits for investors.

Tawfiq continues: “If you reform the climate for direct investment, the stock market will automatically recover, because more private sector companies will mean that you offer a number of them to the stock market to attract financing.”

The Egyptian Stock Exchange competed with several other global stock exchanges for the title of worst last year, according to a report by Bloomberg Economics Agency.

The listing of companies affiliated with the Egyptian military and public sector for the Egyptian Stock Exchange is expected to be refreshing, but many are wondering about the reasons for the delay in these proposals, which were announced two years ago.

Experts expect the Egyptian government at the moment to be afraid of supply due to the unfavorable conditions, pending an improvement in share prices, so that the offer at low prices will not be a waste of public money.

Rania Yaqoub, chair of the board of directors of one of the securities trading companies, told the BBC that the completion of these proposals would bring great liquidity to the Egyptian market, especially as the high market capital in this year’s report was driven by the proposals of companies.

Yaqoub added that the expected rise in inflation will lead to an increase in bank interest rates, which will make the stock market a cheaper instrument for financing.

The past year has witnessed a clear decline in the role of institutions and foreigners in the Egyptian Stock Exchange due to the shift to the debt market, which they considered the safest, in addition to the highest returns, according to Yaqoub.

Less than a month ago, the Egyptian Financial Supervisory Authority prepared a legislative amendment to the Capital Markets Act that must be submitted to Parliament to publish recommendations and advice related to securities listed on the Egyptian Stock Exchange on social media. prohibit and criminalize, which justifies the amendment it aims to deter manipulators who issue recommendations and publish Misleading advice to manipulate small investors and cause losses.

The Egyptian judiciary has previously convicted a number of investors accused of manipulating the stock market, and sentences of imprisonment and fines have been issued against them.

However, analysts say such legislation increases investors’ anxiety about entering the Egyptian stock market, as there will be no freedom in choosing information sources.

Experts are calling for a change in the management philosophy of the Egyptian Stock Exchange, a review of its procedures over the past ten years, and the use of a global advisory committee, as was the case years ago.

The political instability that Egypt has seen over the last decade due to the widespread protests has had wide repercussions on the stock market as two presidents were overthrown during that period.

The number of companies listed on the Egyptian Stock Exchange now stands at 240, compared to 1,075 companies in 2000.