The adoption will take place provided that the new index will be launched within a matter of days, wrote an EGX statement
The Egyptian Exchange (EGX) will be adopting the Tamayoz index methodology in preparation for the launch of a new SME-centric index.
The index, which will include eight listed companies, will be used to measure the performance of small and medium enterprises (SMEs).
EGX Chairperson, Mohamed Farid, explained that the new index will truly reflect the performance and movement of the market, allowing investment managers to issue financial products that track the index, and evaluate their investment portfolios on the basis of the index.
The adoption will take place provided that the new index will be launched within a matter of days, wrote an EGX statement.
The Index, which will measure the performance of the SMEs market during trading sessions, includes 8 companies that will be announced with the official launch.
The new index will have a base value of 1,000 points and a base date of 1 January 2019.
Listing methodology for the index included measuring the strength and quality of financial and operational performance based on compound growth rate of annual revenues from main activity, cash flows from operating, and other indicators.
This relates particularly to the maximum relative weight of a single company within the new index, which is 35 percent.
The limit rests on the basis of market capitalization weighted by free-traded shares, which
Farid explained the limit’s reasoning as done on the basis of market capitalization weighted by free-traded shares. This aims to prevent a limited number of companies from controlling the movement of the index.
It also means that the index will be more reflective of the movement of the market as a whole.
Farid said that within a few days, the EGX will take an executive decision to oblige companies whose securities are listed on the SME market list to contract with an approved and registered sponsor to start the restructuring plan.
This will include obligating the sponsor to assist the companies listed in the SME market to develop and build the capabilities of investor relations.
This aims to create professional communication with shareholders and investment institutions through conferences to announce and analyze the financial statements on a quarterly basis.
The plan also includes the sponsor’s commitment to providing research coverage through research coverage companies, which contributes to attracting more institutional Investments and activating and enhancing liquidity and trading.