According to EGX’s statement, the changes will be implemented next month in February
The Egyptian Exchange (EGX) announced it has completed its development of the EGX30 methodology, aimed at boosting the index’s ability to attract more investments.
The exchange has been working on developing the methodology to increase its attractiveness for investors, as well as contribute to the relative distribution of companies within the index in line with international best practices.
According to a statement, “The modified methodology requires the value of the adjusted market capitalization to be not less than the median of the adjusted market capitalization for the top 60 companies in terms of liquidity. This is to ensure that companies with high liquidity are well represented, which also maintains the attractiveness of the index to invest domestically and globally”.
The EGX30 index reflects the index’s top 30 most traded companies; however, constituents, as they’re known, must also have a minimum 15% free float, be traded on at least 65% of trading days during the rebalancing period, and can’t have 30% or more shares in cross-holdings. You can read more about the current methodology here.
The index is reviewed every six months, usually at the beginning of February and of August each year.
Dr. Mohamed Farid, Executive Chairman of EGX, said that the amendment done on EGX30 methodology aims to have a more stable index, enhance its investment attractiveness, as well as contributing to improving the relative distribution rates of the companies that make up the index. This is done in line with international practices. He added that the new methodology of the index, includes a combination between liquidity and the size of the company, which is "market capital weighted by free trading".
The EGX maintains some flexibility in choosing three companies to be included in the index, however the top 27 companies with the highest liquidity will be automatically included. This rule was created with the idea that automatic inclusion will lead to less changes to the index every time it is reviewed, avoiding the removal of a large number of companies in a single review.
According to EGX’s statement, the changes will be implemented next month in February.
