Egypt bourse hit by emerging market storm, sees new IPOs in 2016
The Egyptian Exchange (EGX) - YOUM7 (Archive)
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CAIRO: Egypt’s stock exchange was hit by this year’s rout in emerging markets, leading firms to postpone share offerings and liquidity to dry up, but parliamentary elections should help restore investor confidence in 2016, chairman Mohamed Omran said.

Interviewed at the Reuters Middle East Investment Summit, Omran said about a dozen companies had registered a new listing on the Egyptian market in 2015, but only half of these had proceeded with an initial share issue.

The others received permission to delay their IPOs, which are usually expected to be launched within six months of listing. Most hope to offer their shares in the first half of 2016, once liquidity and prices recover, Omran said.

Emerging market assets sold off over the summer due to worries about a slowdown in China, weakening commodity prices, and the possibility of a U.S. interest rate rise.

“The second half of 2015 was a difficult period, not just for the bourse but for the economy as a whole,” Omran said.

“I am cautiously optimistic because I think the Egyptian economy has what it takes to return to growth, to attract investment and to improve the investment climate.”

The stock index .EGX30 fell dramatically this year, from a high above 10,000 points in February to a low of 6,641 points in August. It last closed at 7,435 points.

“All the delays in IPO plans are because they say the liquidity is not there,” Omran said.

Long-delayed parliamentary elections, due to conclude this month, should give foreign investors confidence that political stability is returning, he argued. “We have an opportunity … to begin a new chapter, a new beginning in 2016,” he said.

This would enable Egypt to speed up steps to boost growth and improve the climate for investors, he said.

Egypt has been without a parliament since June 2012, when a court dissolved the main chamber.

UPHEAVAL

The last few years have been difficult for the Egyptian economy. The mass uprising that overthrew Hosni Mubarak in 2011 ushered in a period of political upheaval that saw economic growth plummet and shares tumble.

Investors began to return in 2014, with trading volumes in the main stock index .EGX30 rebounding above 2010 levels and some 13 new companies listing. The Egyptian economy also picked up, growing by 4.1 percent in the last fiscal year to June.

Egypt saw three large IPOs in the first half of 2015 worth a total of about 6 billion Egyptian pounds ($745 million).

Among companies looking to list, with a view to launching IPOs next year, are cheese maker Domty and real estate company Misr Italia, Omran said. He declined to give details about the sizes of their potential IPOs, but predicted most IPOs next year would be “small to medium”.

Omran said the bourse turned enough profit in 2014 to cover the three preceding years of losses and would make a surplus again this year, but he declined to give figures.

The central bank introduced capital controls in February to crush a once-thriving black market in dollars. The restrictions have raised concerns among some investors that they will not be able to import raw materials or repatriate profits.

Egypt operates a special fund to help foreign investors repatriate their money, but the currency crisis is one of many problems that has created a negative image among foreign investors, Omran said.

“The money is there, but the confidence needs to be there for liquidity to return,” he said.

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