The Egyptian Exchange (EGX) launches a new index called EGX70 EWI on Sunday replacing EGX70. The new index measures the performance of the best 70 companies on the EGX in terms of liquidity and activity after excluding EGX30 Index constituents.
According to the EGX statement on Saturday, the new index divisor was calculated at 1,000 points. Each company listed on the EGX70 EWI gets the same relative weight, which is about 1.43% in the first days of the periodic review.
During the development process of the EGX30 index methodology, the EGX management took into account the inclusion of companies that achieve high trading values on a monthly basis instead of total trading values at the end of the review period every six months, which could include companies with trading values spikes, but not constantly.
EGX Chairperson Mohamed Farid said that the methodology for calculating the new index is one of the approaches followed by many international institutions that issue indicators that reflect the performance of the companies that make up the index that is more reflective of their price performance.
The new index provides the possibility of creating financial products such as index funds, as the new index is a good tool that investment institutions can target in order to issue investment funds that follow the Index Tracking.
He added that the new index helps enhance the opportunities for growth and development of the investment funds industry by diversifying investment options and enabling them to accurately measure the performance of their portfolios that target the index.
The EGX management held a dialogue with all the actors of the market about the new index, which concluded that the market needs a new index of equal weights, and the exchange completed the requirements of the technical structure and index tests on the electronic trading system, necessary for its final launch scheduled for today, according to the statement.
The EGX launched EGX30 Capped in February 2019, which includes the 30 most active companies in terms of liquidity and activity, while the market capital weighted determines the percentage of free-floating shares and the weight of each company within the index.
Moreover, the EGX also launched in August 2019 the EGX30 TR index, which includes the 30 most active companies for total return, to reflect the effect of cash dividends on the performance of the market. The significance of this is that it was not available before, which reflects the price movements of the shares that make up the index, plus the positive impact of dividends to reflect market performance more comprehensively.
In January 2020, the EGX management completed a comprehensive development process for all sectoral indicators, in light of the extensive structure it conducted on all sectors, and the reclassification and placement of listed companies.
The review and development process ended with the issuance of 17 sectoral indicators instead of 12 before structuring the sectors, as new sectoral indicators were introduced. The most important of which is an indicator for the educational services sector, transportation, and freight services. This aims to create a great deal of equal opportunity among companies operating in the same activity.