The Egyptian Exchange Annual Report Annual Report (2016) P age5

Transcription

1 The Egyptian Exchange Annual Report 2015 Annual Report (2016) P age5

2 Chairman s Message While moving toward the end of the year 2016, one of the most difficult years facing the Egyptian economy from severe economic challenges, tensed regional situation to global economy just starting to recover from recession, the year 2016 represents one of the golden years for the Egyptian Exchange (EGX), bringing a glimmer of hope for the Egyptian economy amidst all these challenges. It is true that we face tough economic conditions and bold reform decisions that were undertaken to bring the economy back on track, aiming to achieve the hopes and aspirations of the Egyptian society. Reform is definitely costly but great hopes and ambitions need great sacrifices and EGX is part of this hope and this reform. We look at the future with eyes full of hope and optimism. We have a genuine desire to support the economy and to be one of the main drivers for economic growth and hence contributing in improving the Egyptian citizens' welfare. We succeed to end the year 2016 with new and unprecedented records. We topped all emerging and developed markets during this year as per Morgan Stanley indices in local currency terms. Additionally, the net foreign inflows recorded one of its highest levels in EGX history. We also have realized the highest-ever trading records over the last 7 years & the market cap. jumped by LE 172 billion during this year, surpassing the LE 600 billion threshold, this in addition to the intensive activity of IPOs. On the investors' protection front, we continued our efforts to intensively develop listing and disclosure rules in This year has also witnessed a wider application of corporate governance as well as having more companies using the online disclosure Page2

3 system. As a result, Egypt ranked 26th in terms of World Bank s disclosure index as per the latest Doing Business Report, where Egypt scored 8 out of 10 points. We re also delighted to say that the year 2016 is considered the year of sustainability for EGX, having sustainability as a main goal in our strategy. We joined the United Nations Global Compact (UNGC) and the United Nations Principles to empower women. We also signed the Marrakech Pledge for fostering Green Capital Markets in Africa in Another equally important achievement made by EGX this year was forming the first sustainability committee. We also issued the first Model Guidance for the sustainability report for listed companies. On the international front, we enjoyed solid relations regionally and internationally. This was clearly reflected in 2016 with the re-election of EGX as a Chairman of the Federation of Euro-Asian Stock Exchanges (FEAS) for the second time in a row. In addition to the re-election of EGX as a member of the Executive Committee of the African Stock Exchanges Association (ASEA) for the third time in a row. EGX was also elected as vice Chairman of the Emerging Market Committees of The World Federation of Exchanges (WFE). The year 2016 ended with an upward momentum fuelled by the serious steps that were undertaken to start the public offerings program that we expect to be a new and strong engine not only for the Egyptian Exchange but also for supporting the state-owned enterprises sector, helping them to start and grow. Finally, I would like to seize this opportunity to convey my sincere gratitude to EGX Board of Directors and employees for their effort, commitment and contribution. I also would like to extend my appreciation to media figures and all market participants for their support for our marketplace. Page3

4 Let me end my words by calling all of you to work together with a unified aim, which is the benefit of the Egyptian market in specific and the Egyptian economy as a whole. The road to success is not easy to navigate, but with cooperation & hard work, it'd be possible to achieve our goals. Sincerely yours, Dr. Mohammed Omran Chairman of the Egyptian Exchange (EGX) Chairman of the Federation of Euro-Asian Exchanges (FEAS) Page4

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6 The Egyptian Exchange in 2016 The Global Economy Slowly Recovers Fears of Recession Still on the Horizon Despite the slow recovery of the global economy during 2016, driven by stable growth rates in China and the success of the emerging markets in restoring some foreign investment inflows, but this recovery remains lower than what was hoped for. This could be described as "fragile recovery", especially with the main challenges constantly facing the global economy, topped by the gloomy picture regarding the expected global economy performance. It is true that the performance of global economies in 2017 is expected to be better compared to 2016, with a growth rate of 3.4% compared to a growth of 3.1% in 2016, as per the projections of the International Monetary Fund (IMF). However, the political instability that the world is witnessing either regarding the EU situation or the new directions of the US policy, in addition to the tensed situation in the Middle East and the continued fragility of the oil and commodity prices as well as the dangers and fears of the rise of the far-right in a number of leading economies and last but not least the widespread dangers of terrorism in many countries all over the world, all of this have cast doubt on the future of the global economy. Global Economies' Performance as Per the IMF (Expected) 2017 (Expected) Global economies 3.2% 3.1% 3.4% Developed economies 2.1% 1.6% 1.8% Emerging economies 4% 4.2% 4.6% Middle East 2.3% 3.4% 3.4% Page6

7 These challenges have been clearly reflected on the Egyptian economy, which suffered remarkably from the retreat in the sources of growth, resulting from the weakness of the tourism sector and the inability of the external sector; representing foreign investments, exports and Suez Canal, to offset this decline due to the sluggish performance of the global economy. As a result, there was a great pressure on the local currency, which led to the emergence of a black market. This was reflected significantly on the investment climate, especially with the wide gap between the official exchange rate and the black market rate. Consequently, the inflation level was affected, hiking significantly as a result of high dependency on imports, which pushed the government to adopt fiscal and monetary restructuring reform program, with the floatation of the Egyptian Pound and the restructure of the subsidy system coming on top of the reform measures. In that regard, for the first time the Central Bank of Egypt (CBE) has allowed banks to determine bid and ask prices of the Egyptian pound according to the demand and supply forces without interference from the CBE in order to eliminate the black market, pushing the exchange rate to register around 19 LE/USD at the end of the year. Additionally, the Egyptian government started to implement the value-added tax and increased fuel prices in a step aiming at restructuring the public budget and lowering the energy subsidies. The reform list also included reducing imports, especially random products, in addition to encouraging and supporting exports and local as well as foreign investment. Moreover, the IPOs program was announced. Furthermore, efforts are exerted to foster international reserves. From another perspective, the government continued its expenditure plans on infrastructure projects. Moreover, the Supreme Investment Council was established, which adopted a basket of measures designed to promote investment and support Medium and Small enterprises Page7

8 sector as well as support companies that export agricultural products. These proinvestment policies also targeted the non-banking financial sector, by continuing postponing the capital gains tax on stock market transactions. This in addition to encouraging investment in industrial zones in Upper Egypt. This coincided with attaining the approval of the International Monetary Fund (IMF) to finance the Egyptian economy, with a US$ 12 billion loan, to be distributed on different tranches effective this year. In spite of the difficulty of those measures and their impact on the Egyptian economy, however, it is expected to contribute in re-stabilizing the economy in the long run, especially with the restoration of foreign investments, restoring foreign tourism arrivals and the continued recovery of the global economy as well. The IMF predicts higher growth rates for the Egyptian economy in 2017 to reach 4% compared to an estimate of 3.8% growth for 2016, with expectations to hit 6% by IMF Forecasts for the Egyptian Economy 7% 6% 6% 5% 5% 4% 4% 3% 6% 4.20% 4% 3.80% (estimated) 2017 (expected) 2021 (expected) Emerging Markets Catch Breath and the Egyptian Market in the Forefront The conditions of the capital markets all over the world were better off compared to economic conditions, especially for emerging markets, which witnessed improvement in their performances this year compared to recent years, where emerging markets Page8

9 experienced significant declines due to global economic turbulence and the decline in the prices of basic goods as well as the political instability. Worth mentioning that the Egyptian market topped all emerging markets this year, experiencing prominent hikes, as revealed below: EGX Indices Outstanding Performance, Realizing its Highest-ever Records The Egyptian market was able to surmount EGX Main Index Reaching its the unfavorable local and regional economic Highest-ever and political conditions driven by the floatation of the exchange rate, together with economic reform measures. EGX 30, the main index of EGX, witnessed an outstanding performance, reaching its highest-ever and approaching 12,500 points, to close the year with 76% gains over the year. The Egyptian Market Topped All Emerging and Developed Markets as per Morgan Stanley At the domestic level, the Egyptian market witnessed one of the best performances in several years, pushing the market to top all emerging and developed markets as per Morgan Stanley Indices denominated in local currency, to record a remarkable increase surpassing 102%. Despite domestic and regional challenges, the Egyptian market is the best performer in 2016 compared to all emerging and developed markets as per MSCI (denominated in local currency) Page9

10 Percentage Change in MSCI Egypt vs. Other Emerging Markets (in Local Currency Terms) in 2016 Highest Trading Value in 7 Years and 140% Outstanding Increase in the Trading Value in Q4 EGX strong performance wasn't only demonstrated in the hike of its indices, but it was clearly shown in the increase in the liquidity levels in the market, whereby the market witnessed a remarkable surge during this year, recording one of its highest trading records in 7 years, with the trading value of stocks registering more than LE 180 billion, up The liquidity level in 2016 has jumped to reach one of its highest records in 7 years and 147% surge in the quarterly trading value in Q4 by 56% compared to last year. This was mainly led by the tremendous surge in the fourth quarter of 2016 liquidity levels, which soared by 147% compared to the average quarterly trading value, to approach LE 80 billion; the highest quarterly trading value since One of the Highest Net Foreign Inflows in EGX History, Surpassing 70% of the Cumulative Records in 8 Years Page10

11 The net foreign inflows recorded one of its highest levels in EGX history, to reach Unprecedented record of net more than LE 7 billion, which is 70% foreign inflows and 70% higher higher than the cumulative record in 8 than the cumulative records in 8 years. The non-arab foreign investors years registered a net inflow of LE 6 billion. Likewise, the Arab investors generated net inflows of LE 1 billion, after excluding deals and bonds. 913 Newly Coded Foreign Institutions in 2016 The Egyptian market was able to attract 913 new foreign institutional investors & investment funds in This was mainly backed by the improvement of the conditions of the Egyptian market together with the remarkable trading activity witnessed this year. More than 900 Newly Coded Foreign Institutional Investors & Investment Funds in New Amendments to the Listing Rules EGX continued amending its Listing rules to be on par with the international standards and to achieve more resilient rules and regulations that can New amendments to the ensure effective application in the market. The Listing, Disclosure rules and amendments included rules regulating cross ownership the executive regulations between sister companies, the disposition of substantial ratio of the company s assets, subsidiaries deals on treasury stocks, in addition to forming companies audit committees and adjusting the definition of independent board member. For the first time, trading of rights issues became obligatory for companies willing to increase their capital. Additionally, an amendment is currently being made, which will allow non-listed companies to trade its rights issues through the OTC orders market. Page11

12 Furthermore, EGX amended the rules and executive regulations organizing the issuance and conversion of Global Depository Receipts (GDRs), where the percentage of shares that correspond to GDRs cannot exceed the company s free float ratio announced at the end of each week. The company cannot issue new GDRs if it exceeded the above mentioned ratio. Moreover, the new amendments allowed Egyptian companies listed in foreign currencies to be traded in local currency according to specific rules and regulations. In addition, the new amendments granted companies a period of 5 working days, instead of only 2 working days, to buy treasury stocks. A New System to Measure Customer Satisfaction To ensure having a resilient and efficient relationship with investors, EGX launched a new system to measure customer satisfaction in dealing with the Listing sector concerning the listing & capital increases procedures, etc.. In that regard, customer satisfaction survey has been set to measure the degree of satisfaction of customers in dealing with this sector & to identify any complaints to be handled quickly and effectively. New Amendments to the Disclosure Standards Egypt Holds the 26th Place in the World Bank s Disclosure Index EGX Board of Directors approved a new amendment enhancing disclosure standards and protecting shareholders rights. The amendment stipulates that a company shall be suspended from trading if it fails to send its financial statements during the 45 days following the set legal deadline to send the financial statements for one period. This amendment replaced the previous regulation which did not allow suspension of trading unless the company surpasses the 15 days grace period granted to companies that did not send its financial statements for two consecutive periods. This amendment will help avoiding problems resulting from applying the previously mentioned regulation which tolerated the delay of sending financial statements without sanctioning the violating company, which contradicts protecting shareholders rights. Page12

13 According to these amendments the financial statements should be sent to EGX before the commencement of trading session, by 9:30 am at most instead of 10:00 am, so that it can be disseminated to all investors before the start of the trading session. In the meantime, EGX continued raising awareness of the listed companies through conducting several workshops in Cairo and Alexandria to educate them about the new listing amendments and how to avoid making disclosure mistakes. This in turn had a remarkable impact on Egypt s Egypt dominates the 26th place ranking in terms of the minority protection in the World Bank Disclosure indicator, according to Doing Business Report Index, whereby Egypt scored 8 issued by the World Bank and IFC, to Jump 15 out of 10 points ranks. Egypt also dominated the 26th place in the World Bank Disclosure Index, where Egypt scored 8 out of 10 points. Furthermore, the report indicated that the most important reforms which took place throughout 2016 were related to increasing the rights of shareholders in material decisions in addition to adhering to disclosing ownership percentages and structure. More than 70% of the Listed Companies Use the Online Disclosure System EGX continued supporting the online disclosure system which helped to substantially decrease the time needed to disclose information to investors. The online disclosure system is now 70% of the Listed Companies available for all listed companies to use. Use the New Online Disclosure System Furthermore, several training sessions were held to educate companies about using the system which helped in increasing the number of listed companies using it, to reach more than 70% of listed companies. 5 New IPOs IPOs Executed in 30 Months exceeds their Cumulative Value in 5 Years EGX continued witnessing a remarkable IPOs activity, whereby 5 new IPOs were executed, with a total value of LE 2.3 billion, to reach LE 9 billion in the previous 30 months only; a 40% increase compared to the cumulative value of IPOs executed in 5 years since Page13

14 Moreover, a company is currently finishing the final procedures to conclude the IPO process. Worth mentioning that this is considered the first Egyptian Depository Receipts (EDRs) to be offered by a foreign company in the Egyptian market. LE 172 Billion Increase in the Market Cap to Reach Its Highest Level in 8 Years EGX remarkable performance in 2016 was reflected on the market capitalization levels which surpassed LE 600 billion for the first time since the global financial crisis in The market capitalization recorded an increase of LE 172 billion, which is 40% higher compared to last year. 8 New Listed Companies Despite the tough challenges facing the Egyptian economy recently, 8 new companies were listed this year (a 3% increase than last year) which goes in line with the percentage of 3% increase in the number of annual increase targeted by EGX. This can be companies listed which goes in attributed to the Egyptian Exchange strategy line with the percentage of which focuses on increasing market depth and annual increase targeted by EGX diversity through promotional campaigns to attract promising companies to get listed, in addition to the various facilities offered to companies willing to list. 47 New Capital Increases in 2016 & a Total Value of LE 28 billion in 3 Years EGX continued its efforts to support the Egyptian economy through raising funds for companies, Total value of capital increases helping them to expand and grow & creating more reached LE 28 billion in the past job opportunities. In this regard, 47 companies 3 years collectively. increased their capital in 2016, representing more than 18% of the total number of listed companies, with a total value of more than LE 5.2 billion. Worth mentioning that the total value of capital increases reached LE 28 billion in the last 3 years collectively. State-owned Enterprises IPOs Program Goes into Effect in Trading Commences on a State-owned Enterprise for the 1st Time in 10 Years Page14

15 Within the Government efforts to foster the IPOs Commencement of trading on a program, a state-owned enterprise is currently state-owned company for the concluding the listing procedures to list on EGX. first time in 10 years. In addition, the Government announced that several state-owned companies are preparing to get listed on EGX. Moreover, the year 2016 witnessed the commencement of trading on a state-owned company for the first time in 10 years. A Hike in Block Trading Activity The year 2016 witnessed remarkable activity in block trading to reach LE 1.8 billion compared to LE 538 million in 2015; an increase of 250% in only one year. Moreover, the value of acquisition deals amounted to LE 511 million in A hike in block trading activity to increase by more than 250% in one year 45% Increase in NILEX Trading Value & 3 New Listed Companies in 2016 EGX continued supporting the Small and Medium Enterprises sector in Egypt through supporting the SMEs market Nilex, whereby 3 45% Increase in NILEX Trading new companies got listed in 2016 to reach 32 Value companies. NILEX realized good liquidity levels, whereby the trading value surged by 45% to record almost LE 900 million compared to LE 617 million in 2015, with the turnover ratio jumping to 63%. From another perspective, EGX continued its efforts in promoting and raising awareness about the importance of the role of Nilex as a platform for financing SMEs, through convening meetings with promising companies, in addition to conducting workshops with related working organizations; such as the Rotary Club and Egyptian Women Association, to raise their awareness about Nilex and to encourage women and empower them to have access to finance through Nilex. Page15

16 Furthermore, a promotional campaign, in collaboration with a sponsor, is being prepared to raise awareness of targeted industrial zones in Upper Egypt about the importance of Nilex as a platform for financing SMEs is the Year of Sustainability for EGX The year 2016 is considered the year of sustainability for the Egyptian Exchange, EGX joins the United Nations whereby EGX has exerted intensive efforts to promote sustainability. In that respect, the Egyptian Exchange joined the United Nations Global Compact (UNGC) and the United Nations Principles to empower women. The Egyptian Global Compact (UNGC), the United Nations Principles to empower women. EGX also signs the Marrakech Pledge for fostering Green Capital Markets Exchange (EGX) also signed the Marrakech Pledge for fostering Green Capital Markets in Africa in From another perspective, the Egyptian The First Sustainability Committee in Exchange (EGX) formed the first Sustainability Committee that is responsible for setting and following-up the Exchange's plans to implement sustainability practices. The Committee includes EGX; encompassing specialized experts in sustainability EGX issues the first Model Guidance for the sustainability report for listed companies. specialized experts in sustainability as well as representatives from the private sector and a number of international organizations. During the year, the Egyptian Exchange has also issued the first Model Guidance for sustainability reporting for listed companies. This came as a step toward raising the listed companies' awareness about the importance of being adhered to the principles of sustainability. EGX conducted several workshops to its listed companies to shed the light on the guidance, which was introduced in a social dialogue before approving it. On the other hand, the Egyptian Exchange continued its efforts in endorsing any sustainable business practices. In that respect, EGX has joined numerous social campaigns including ringing the bell to Celebrate International Women's EGX joins numerous social campaigns including ringing the bell to Celebrate International Page16 Women's Day, Autism Awareness and Orphan Day.

17 Day in Collaboration with UN Women. EGX also joined Light It up Blue initiative to support the patients with Autism. Additionally, EGX participated in the Orphan Day initiative where EGX encouraged its employees and a number of listed companies to donate. Moreover, a number of orphanages were invited by EGX, whereby the children opened the trading session for the first time in a big celebration in the Orphan Day. Worth mentioning that the total donations- made by EGX, its employees and different market participants- have reached almost LE 3 million this year. In recognition of the efforts done by the Egyptian Exchange in promoting sustainability in addition to its effective participation in sustainability EGX was invited in a number of UN forums to highlight its sustainability experience. initiatives, EGX was elected as a vice Chairman of the Suitability Committee of the World Federation of Exchanges (WFE). Additionally, EGX Chairman was invited as a speaker in the Global Forum on Trade and Development "UNCTAD" in Nairobi. The Chairman was also invited by the United Nations Sustainable Stock Exchanges initiative to participate in "The Global Dialogue for Stock Markets" in Singapore and likewise in Geneva. Sound International Relations EGX continued its efforts to strengthen its international relations, whereby EGX Chairman EGX Chairman was re-elected, as the Chairman of the was re-elected, as the Chairman of the Federation of Euro-Asian Stock Federation of Euro-Asian Stock Exchanges (FEAS) for the second time in a row, winning Exchanges (FEAS) for the second time in a row. majority of votes against Iran. The elections were held during FEAS annual meetings hosted by the Egyptian Exchange in Sharm Elsheikh. EGX was also re-elected as a member of the Executive Committee of the African Stock Moreover, EGX was also re-elected as a member Exchanges Association (ASEA). of the Executive Committee of the African Stock Exchanges Association (ASEA). In addition, the Egyptian Exchange was chosen to host the association annual meeting for the second Page17

18 time in 5 years. Furthermore, EGX was also elected as vice Chairman of both the Emerging Market Committee and the Sustainability Committee of The World Federation of Exchanges (WFE). EGX is sparing no efforts to strengthen its bilateral collaboration with other markets regionally & internationally. In this regard, the Egyptian Exchange signed Memoranda of Understanding (MOUs) with Bahrain Bourse and Bolsa BM&F BOVESPA. Moreover, negotiations are being made with one of the leading Asian markets, to allow investment banks from both sides to issue and list ETFs on both markets, which will give exposure to the Egyptian Market among international markets. MOUs with Bahrain Bourse and Bolsa BM&F BOVESPA. Promotion and Awareness The Egyptian Exchange held many meeting during 2016 to promote and attract investment opportunities to the Egyptian market. In this regard, EGX participated in Investment in Africa conference held in Sharm Elsheikh, whereby many promising investment opportunities in the Egyptian market were presented. Moreover, EGX Chairman welcomed Mr. David Cote, the CEO of Honeywell, to discuss the development of the Egyptian market. Worth mentioning, Honeywell is one of the leading corporations that specializes in inventing and manufacturing technologies with annual sales of more than USD 38 billion and also one of the corporations listed on the Fortune 100 list. Furthermore, EGX Chairman made a series of negotiations, organized by Bank of New York and Auerbach Grayson, with a number of leading financial and investment organizations around the world. The Chairman met Ashmore Equities Investment, one of major investors in emerging markets, in addition to The Rock Creek Group and SQM Frontier Management, with a total of approximately USD 100 billion of assets under Page18

19 management, to discuss the investment potentials in Egypt in general and the Egyptian Exchange in particular. On the other hand, EGX continued its social awareness program, offering training programs in numerous Egyptian universities in different governorates. In addition, EGX invited a number of students to be trained at EGX. Launching a New Stock Market Museum In order to document EGX history & emphasize its role in serving the economy, EGX launched the first stock market museum. The museum holds collectibles that go back to the 19th century to raise social awareness about EGX role in economic development over the period of more than 130 years. 5 ministers participated in the museum opening 1000 visitors to the museum in 5 months ceremony where EGX management announced opening the museum for the public for free. Worth mentioning that 1000 visitors visited the museum in the first 5 months. Enhancing the Technological Infrastructure Continuous developments to the technological infrastructure have been undertaken by EGX, starting with transferring EGX data centers and servers to its premises in Smart village without affecting the services provided by the IT sector. Finally What was achieved during the year 2016 should be an incentive to exert more efforts in 2017 to maintain the sound performance achieved and to keep supporting economic reform plans to restore investors confidence which in turn will help boosting market performance in the coming period. EGX plans to continue fulfilling its strategy for the period ( ), with EGX nonstop contribution to economic and social development coming on top of its priorities. This in addition to the continuous development of its regulatory & organizational Page19

20 framework, together with maintaining a transparent trading environment that ensures maximum investors' protection and helps attracting foreign investments. The Egyptian Exchange will always strive to maintain the technological lead to help efficiently manage the trading environment. Furthermore, EGX will keep promoting sustainability practices and will encourage the private sector to engage more in social services activities. Page20

21 1. Market Performance A. Market Indices Performance The Egyptian market (EGX) showed an outstanding performance during 2016, whereby all market indices surged significantly during this year. EGX30 index took off, reaching its highest-ever, to exceed 12,000 points, realizing 76% gains over the year. The Egyptian Exchange main index commenced the year on a negative note, retreating by 14% in January only, due to the tough conditions of the global markets and the decline in oil prices. However, the market gradually began to recover, witnessing prominent hikes due to the government economic reform in early November, on top of which came the floating of the Egyptian pound. The reforms had a significant impact on regaining foreign investors' confidence in the Egyptian market, which in turn led to a surge in EGX 30 index by almost 47% during November and December only. EGX 30 index witnessed its highest-ever in December, to conclude the year with 76% gains. Furthermore, EGX70 and EGX100 indices have increased by 22% and 39%, respectively. Moreover, EGX20 Capped Index has recorded an increase of 74%, while EGX50 EWL index has soared by 60%. Furthermore, Nile index has witnessed an increase of 14% in EGX Indices' Performance during 2016 Dow Jones EGX Egypt EGX 30 index EGX20 Capped index 74% 79% 76% S&P/EGX ESG index 68% EGX 50 EWI index 60% EGX100 index 39% EGX70 index 22% Nile index 14% 0% 20% 40% 60% 80% 100% Page21

22 Market Indices Indices Performance in 2016 Index Open High Low Close EGX 30 Index (in Local Currency) 7, ,420 5,713 12, EGX 70 Index EGX 100 Index , , DJ EGX Egypt Titans 20 Index 1, , , , S&P/EGX ESG Index 1, , , EGX 20 Capped Index 7, ,557 5,686 12, Nile Index EGX 50 EWI Index 1, ,944 1,012 1, Page22

23 EGX 30 Index Performance (January - December 2016) 13,000 12,000 76% 11,000 10,000 9,000 8,000 7,000 6,000 5,000 31/12/ /1/ /2/ /3/ /4/ /5/ /6/ /7/ /8/ /9/ /10/ /11/ /12/2016 Page23

24 B. Sector Indices Performance Most of sectors' indices have seen a strong positive performance in 2016, with the Telecommunications sector coming on top, with 138% gains. The sector ranked second in terms of volume traded, recording 18 billion securities worth LE 28 billion. Second in line came the Basic Resources sector, rising up by 88%, followed by the Financial Services Excluding Banks sector, realizing an increase of 76%. Worth mentioning that the Financial Services Excluding Banks sector ranked third in terms of volume traded, recording 17 billion securities worth LE 36 billion. The fourth and fifth places were captured by the Banking and the Personal and Household Products sectors, recording an increase of 73% and 70%, respectively. Recording a 58% YOY increase, the industrial Goods, Services and Automobiles sector occupied the fourth place in terms of volume traded, recording 3 billion securities worth LE 7 billion. The Chemicals sector, recorded an increase of 52%, followed by the Real Estate sector, which soared by 41%. The Real Estate sector ranked first in terms of volume traded, reaching 18 billion securities worth LE 47 billion. Healthcare and Pharmaceuticals sector recorded an increase of 30%, followed by the Travel and Leisure sector, which surged by 19% over the year. The Travel and Leisure sector occupied the fifth place in terms of volume traded, recording 2.4 billion securities worth LE 4 billion. Finally, the only declines for the year were recorded by the Construction and Materials and the Food and Beverages sectors, declining by 9% and 19%, respectively. Page24

25 Sector Indices' Performance in 2016 Telecommunications Basic Resources 88% 138% Financial Services excluding Banks Banks Personal and Household Products Industrial Goods, Services and Automobiles Chemicals 52% 76% 73% 70% 58% Real Estate Healthcare and Pharmaceuticals 41% 30% Travel and Leisure Construction and Materials Food and Beverage 19% 9% 19% 40% 20% 0% 20% 40% 60% 80% 100%120%140%160% Sector Indices 5 Most Active Sectors in terms of Volume Traded in 2016 Sector Trading Volume (billion shares) Trading Value (LE billion) Average P/E Ratio 31/12/2016 Average DY (%) 31/12/2016 Real Estate Telecommunications Financial Services excluding Banks Industrial Goods, Services and Automobiles Travel and Leisure Page25

26 2. Egypt vs. Emerging Markets Despite the tough economic and political conditions witnessed regionally and internationally in 2016, the Emerging markets have smelled the signs of recovery this year, with EGX experiencing an outstanding performance compared to other market. As per Morgan Stanley Price Index (MSCI) -denominated in local currency terms-, EGX was the best performer in 2016 compared to other emerging markets, surging by 102% over the year. Percentage Change in (MSCI) Egypt vs. Emerging Markets (in Local Currency Terms) in 2016 Egypt Peru Brazil Russia Thailand Taiwan Indonesia Korea United Arab Emirates Turkey Emerging Markets Mexico Qatar South Africa India China Malaysia Greece 0.3% 1% 3% 11% 33% 29% 22% 13% 12% 10% 9% 8% 7% 6% 2% 2% 54% 102% 20% 0% 20% 40% 60% 80% 100% 120% Source: Morgan Stanley Website Page26

27 Indices Performance S&P Regional Indices' Performance during 2016 Index Change (%) S&P Pan Arab Composite Index 3.56% S&P/IFCI EMEA Price Index in US dollar 18.39% S&P/IFCI Asia Price Index in US dollar 2.2% S&P/IFCI Europe Price Index in US dollar 23.85% Source: Standard & Poor's Website Page27

28 3. Egypt vs. Arab Markets The Arab markets have witnessed a mixed performance during the year EGX - With a big difference- topped all Arab markets, rising up by 76% over the year. This came in spite of the slight ups and downs that all Arab markets have experienced at the end of the year, following the fall in oil prices, together with the regional political events. Egypt vs. Arab Markets in 2016 Egypt Casablanca Dubai Muscat Abu Dhabi Saudi Arabia Kuwait Bahrain Qatar Amman 4% 12% 7% 6% 4% 2% 0.4% 0.1% 37% 76% 10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Source: Reuters Page28

29 4. Market Aggregates a. Market Totals Despite the challenges witnessed during 2016, the Egyptian market has maintained its second-best performance since the revolution of 2011, whereby the total value traded reached LE 285 billion, compared to LE 248 billion in Moreover, the trading volume recorded more than 69 billion securities, compared to 45 billion securities in Likewise, the number of transactions recorded more than 6 million during this year versus 4.9 million transactions in The value traded of the main market amounted to LE 265 billion in 2016 compared to LE 226 billion in 2015 (including both bonds and deals). Meanwhile, the volume traded of the main market reached 66 billion securities compared to 43 billion securities in On the other hand, the Over-the-Counter market (OTC) registered a trading value of LE 19 billion in 2016, as opposed to LE 21 billion in Additionally, the trading volume of the OTC market reached 2 billion securities in 2016, compared to 1.8 billion securities last year. From another perspective, Nilex (SMEs market) maintained good levels of trading activity in 2016, whereby the trading value reached LE 894 million versus LE 618 million in Moreover, volume traded reached 565 million securities compared to 380 million securities in 2015, with an increase of 49% over the year. The market capitalization of the listed stocks in the main market witnessed a remarkable increase in 2016, to conclude the year at LE 601 billion as opposed to LE 430 billion at the end of 2015; an increase of LE 172 billion, representing 25% of GDP. Page29

30 Indicators Trading Aggregates Total Value Traded (LE billion) Main Market Stocks Deals Bonds Nilex OTC Market Total Volume Traded (billion securities) Main Market Nilex OTC Market Total Number of Transactions (million) Main Market Nilex OTC Market Average Daily Value Traded (LE million) Main Market (excluding deals and bonds) Nilex OTC Market Turnover Ratio ** (%) 32* 29* 21* 38* 27* 30* Number of Trading Days 207^^ Listed Companies (Main Market) Number of Listed Companies Average Company Size (LE million) *** 1,378 1,763 2,013 2,337 1,945 2,709 Number of Traded Companies Number of Traded Companies as a % of Number of Listed Companies Market Capitalization End of Year (LE billion) **** Market Capitalization as a % of GDP Non-Arab Foreign Participation as a % of Total Value Traded^^^ Arab Participation as a % of Total Value Traded^^^ Listed Companies (Nilex) Number of Listed Companies Number of Traded Companies Market Capitalization End of Year (LE billion) **** Page30

31 Main market includes stocks, bonds, mutual funds, deals & ETFs unless otherwise specified. * After excluding deals ** Turnover Ratio (%) = value traded of listed shares / market capitalization *** Average Company Size = Market Capitalization / no. of listed companies **** Market Capitalization = no. of listed shares x close price end of year ^^ The Exchange was closed from 30/1/2011 till 22/3/2011. ^^^After excluding deals & bonds Monthly Trading Value & Volume during ,500 13,300 LE Million 42,000 32,500 23,000 13,500 11,500 9,700 7,900 6,100 4,300 2,500 Million Securities 4, Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Trading Value Trading Volume Page31

32 Trading Value & Volume ( ) LE Billion Billion Securities Trading Value Trading Volume Listed vs. Traded Companies ( ) % 93.6% 96.2% 93.5% 96.8% 94.5% 120% # of Companies % % 0% # of Listed Companies # of Traded Companies Traded as a % of Listed Companies Page32

33 b. EGX Indices' Constituents Trading Value (LE Billion) Trading Volume (Billion shares) # of Trades (Million) EGX EGX EGX EGX Indices' Constituents as a % of the Trading Aggregates of the Total Listed Stocks (Main Market) Page33

34 c. Brokerage Firms Eligible for Online Trading Value Traded (LE Billion) Volume Traded (Billion) Number of Trades (Million) Sell Buy Sell Buy Sell Buy d. Intra-day Trading System Intra-day Trading recorded a trading volume of LE 7 billion shares in 2016, representing 10% of the total volume traded of listed stocks in the main market. Moreover, their value traded amounted to LE 23 billion, making up around 12% of the total value of the listed stocks in the main market. Likewise, the number of transactions executed through intra-day trading registered about 800 thousand transactions, which accounted for 13% of the total number of transactions of the listed stocks in the main market. Trading Aggregates for Intra day Trading System during 2016 Trading Volume (Billion Shares) Trading Value (LE Billion) # of Trades (Million) Total Trades Executed through Intra day Trading System % of Total Listed Stocks (Main Market) 10% 12% 13% Page34

35 e. 10 Most Active Companies in Terms of Volume Traded (Listed Stocks-Main Market) in 2016 Trading Volume (Billion Shares) Trading Value (LE Billion) Orascom Telecom Media and Technology Holding Porto Group Holdings (Porto Group) 8 2 Amer Group Holding (Amer Group) 7 2 Citadel Capital - Common Shares 5 5 Palm Hills 4 11 Global Telecom Holding 3 14 Emaar Misr for Development 2 6 Arabia Investments, Development, Fin. Inv. Holding 2 2 Egyptian for Tourism Resorts 2 2 T M G Holding 1 10 Page35

36 f. NILEX Companies' Performance Nilex market has witnessed an outstanding performance during the year 2016, as the trading value has jumped to reach LE 894 million, an increase of 45% compared to last year. Moreover, volume traded reached 565 million securities, an increase of 49% over the year, while number of transactions reached 114 thousand transactions. Worth mentioning that the total market capitalization of NILEX listed companies have almost reached LE 1.5 billion at the end of On the other side, Nilex has maintained its high liquidity levels compared to the main market, whereby the turnover ratio of Nilex market has reached around 63% this year, in comparison to the turnover ratio of the main market, which amounted to 30%. Traded Companies in NILEX During 2016 Company Name Trading Volume (Million Shares) Trading Value (LE Million) Market Cap. (LE Million) at the End of 2016 Close Price (LE) at the End of 2016 Al Fanar Contracting Construction Trade Import and Export Co. Vertika UTOPIA Pharaoh Tech for Control and Communication Systems Misr Intercontinental for Granite & Marble (EGY-STON) Page36

37 Arabian Rocks Plastic Industries International Dry Ice Company- Difco Ameco Medical Industries Ferchem Misr Co. for Fertillizers & Chemicals Integrated Engineering Group Company El-Barbary Investment Group Port Saied for Agricultural Development And Construction Univert Food Industries International Company for medical Industries - ICMI International Business Corporation for Trading and Agencies - IBC Al Moasher for Programming and Information Dissemination Egypt - South Africa for Communication Genial Tours Brothers Solidarity for Real Estate Investment & Food Security Arab Development & Real Estate Investment M.B Engineering Egyptian Modern Education Systems Misr Kuwait Investment & Trading Co. First Investment Company and Real Estate International Company for Fertilizers and Chemicals El Bader Plastic Marseille Almasreia Alkhalegeya for Holding Investment Page37

38 5. PE Ratio and Dividend Yield The Egyptian Exchange has realized a price earnings (P/E) ratio for the main market of 26.6 times at the end of 2016 compared to 12 times at the beginning of the year. Meanwhile, the dividend yield recorded 9% at the end of 2016 compared 8.9% at the beginning of the year. The figures below portray the monthly PE and DY over the year Price Earnings (PE) Ratio in January Fabruary March April May June July August Septamber October November December % Dividend Yield (DY) in January Fabruary March April May June July August Septamber October November December Page38

39 6. Development of Number of Investors in 2016 EGX was able to attract 17 thousand new investors in 2016; of which the largest portion was captured by the newly coded Arab and Non-Arab foreign institutions compared to the Egyptian Institutions. The number of newly coded Arab and Non-Arab foreign institutions has reached 913 institutions in 2016, representing 67% of the total number of newly coded institutions during the year, as shown in the table below. Number of Newly Coded Investors in 2016 vs Individuals Institutions Total Egyptians 14,811 14, ,219 14,884 Arabs Non-Arab Foreigners , ,046 1,684 Total 16,307 15,890 1,691 1,370 17,998 17,260 Page39

40 7. Investors Trading Activity in the Egyptian Market A- Individuals vs. Institutions The Egyptian market was dominated by individuals, accounting for 65% of the value traded during Meanwhile, the institutions captured around 35% of the value traded, after excluding deals and bonds. The institutions ended the year 2016 as net buyers, recording net inflows of LE 2 billion versus LE 517 million outflows during 2015, after excluding deals and bonds. Individuals vs. Institutions in Terms of Value Traded in 2016* Individuals 65% Institutions 35% * After Excluding Deals & Bonds * After Excluding Deals & Bonds B- Egyptians vs. Foreigners Foreigners accounted for about 26% of the total value traded in 2016, of which more than 16% was captured by non-arab foreign investors, while the remaining 10% was captured by Arab investors, after excluding deals and bonds. Worth mentioning that Page40

41 non-arab investors recorded a remarkable net buy of more than LE 6 billion, while, the Arabs were net buyers, realizing a net inflow of LE 1 billion. Egyptians vs. Foreigners in Terms of Value Traded in 2016* Arabs 10% Egyptians 74% Non-Arab Foreigners 16% * After Excluding Deals & Bonds Egyptians' Trading in 2016* Arabs' Trading in 2016* Non Arab Foreigners' Trading in 2016* Individ uals 80% Institut ions 20% Indivi duals 55% Institu tions 45% Instituti ons 96% Individu als 4% * After Excluding Deals & Bonds As for the foreign participation by region, Arabs and Europe have dominated foreign investments on EGX in 2016, capturing around 37% and 36% of the total foreign investments, respectively, after excluding deals and bonds. USA & Canada investments accounted for 14% of the foreign investments. Page41

42 At the country level, Saudi Arabia has dominated foreign investments, capturing around 17% of the total foreign investments on EGX in 2016, followed by the USA & the United Kingdom, each constituting around 11% of the total foreign investments, after excluding deals and bonds. Meanwhile, United Arab Emirates captured around 9% of the total foreign investments, after excluding deals and bonds. Foreign Participation by Region in 2016* Foreign Participation by Country in 2016* Europ e 35% Others 14% Arabs 37% USA & Canad a 14% Other s 52% UAE 9% Saudi Arabia 17% USA 11% UK 11% *After Excluding Deals & Bonds Page42

43 8. Listed Companies/New Issues in a. New Listings & Capital Increases The Year 2016 witnessed good listing activity, whereby 8 new companies were listed this year compared to 15 new listed companies in Worth mentioning that the total value of the newly listed companies in 2016 amounted to LE 1 billion. From another perspective, EGX continued its enormous efforts in helping companies to raise their capital in In that regard, 47 companies raised their capital during this year, with a total value of LE 5.2 billion. Listings During 2015 and No. of Companies Total Value (LE Million) No. of Companies Total Value (LE Million) New Listing Capital Increase De Listing** 15 * 6, , , ,045 *The EDRs of Alsalam Holding Company was listed but not enrolled yet, the listing of DPK Pharma Company was considered as if it never took place. **Does not include the companies whose listings were considered as if it never took place. Page43

44 b. Initial Public Offerings (IPOs) EGX has performed well regarding IPOs activity, whereby 5 IPOs were executed during the year 2016, with a total value of LE 2.3 billion Initial Public Offerings (IPOs) during 2016 Company Name Offering Date Issue Size (Million Shares) Issue Size (LE Million ) Arabian Food Industries DOMTY Mar ,127 Obour Land for Food Industries Dec Cleopatra Hospital Company May M.B Engineering Apr Arabian Rocks Plastic Industries Dec Total 2,300 Page44

45 IPOs & Capital Increases (LE Billion) Capital Increases IPOs Page45

46 9. Acquisition Deals during 2016 The number of acquisition deals amounted to 8 deals worth LE 511 million in These deals included the sale of 97% of Misr National Steel - Ataqa to Al Wehda for Industrial Development in a deal worth LE 320 million, in addition to the sale of 8% of El Kahera Housing by Smw Investments Company, in a deal worth LE 80 million. From another perspective, the year 2016 witnessed remarkable activity in block trading to reach LE 1.8 billion compared to LE 538 million in 2015; an increase of 250% in only one year. Acquisition Deals in Acquirer Security Date % Al Wehda for Industrial Development Value (LE Million) Misr National Steel - Ataqa Oct Smw Investments Company El Kahera Housing Dec Sarwa Investments El Kahera Housing Dec Page46

47 10. Market Capitalization The market capitalization recorded more than LE 601 billion at the end of the year 2016, with an increase of 40% compared to last year. Moreover, Nilex market capitalization witnessed a yearly increase of 39%, to culminate the year at LE 1.4 billion. Additionally, the market capitalization represented 25% of the GDP, as depicted in the table and the figures below. a. Market Capitalization (LE Billion) 31/12/ /12/2015 Change (%) Total Market Cap. (Main Market) % Total Market Cap. (Nilex) % Total Market Cap. (Main Market) as a % of GDP 25% 22% GDP used is LE billion for the year 2014/2015 (preliminary figure) according to the Ministry of Finance. Page47

48 500 Market Capitalization for EGX Indices' Constituents (End of 2016) LE Billion EGX 30 EGX 70 EGX 100 b. Market Capitalization by Sector Personal and Household Products 4% Travel & Leisure 4% Construction and Materials 4% Chemicals 5% Food and Beverage 5% Industrial Goods and Services and Automobiles 9% Financial Services excluding Banks 11% Others 9% Banks 25% Real Estate 12% Telecommunicatio ns 12% Page48

49 11. Bonds The bond market maintained its good performance during the year 2016, recording a trading value of about LE 78 billion compared to LE 89 billion during last year, which was the highest recorded figure in EGX history. Likewise, the volume traded of bonds recorded 76 million bonds versus 86 million bonds in Treasury bonds issued through the Primary Dealers System still account for the lion s share of the total bond's trading activity. Trading Aggregates for Bonds in 2016 Traded Value (LE Million) Traded Volume (Thousand) Government Bonds 77, ,016.9 Government Bonds (According to Primary Dealers System) Housing Bonds 77, , Corporate Bonds Total 77, ,066.9 Page49

50 12. Global Depository Receipts (GDRs) The Egyptian GDRs showed a mixed performance in The highest gains were realized by Global Telecom Holding (43%), followed by Egyptian Financial Group Hermes Holding (26%). However, the rest of the GDRs witnessed a decrease as shown in the table below. The Performance of Some of the Egyptian GDRs in 2016 Conversion Ratio* GDR Closing Price (US$) on 31/12/2015 GDR Closing Price (US$) on 31/12/2016 Change (%) Global Telecom Holding % Egyptian Financial Group Hermes Holding % Arabian Food Industries DOMTY ** % Palm Hills Development % Commercial International Bank/ Egypt (CIB) % Telecom Egypt % Orascom Telecom Media and Technology Holding % Edita Food Industries % Suez Cement % *Represents the number of GDRs per share. ** Represents the closing price of 26/09/2016, date of the debut of trading. - Closing Prices are adjusted according to corporate actions. Source: Reuters Page50

51 The Bank of New York Mellon Egypt GDRs Index The figure below shows the performance of Bank of New York Mellon Egypt GDRs index in This index was issued by The Bank of New York Mellon on the 3rd of October 2008, recording a decrease of 10.5% during Source: Market Watch Page51