Thursday, Feb 23, 2012

--Says investors more confident now amidst growing political clarity

--Reckons stability will encourage more IPOs

--Expects Egypt to keep emerging market status

--Sees new sukuk law by end June; a move that will boost liquidity

By Farah Halime

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--The Egyptian Exchange expects up to eight companies to sell shares publicly this year as investor confidence returns amid an improving political environment, and sees no reason for it to lose its emerging market status post revolution, according to its chairman.

The market, once a foreign investor favourite, saw a sharp 49% fall in value last year as investors fled the Arab state amid political and economic concerns after a popular uprising overthrew former President Hosni Mubarak.

Egyptian stocks have however rebounded this year, adding some 40% to date, as investors cheered the mostly peaceful first parliamentary elections in a post Mubarak era and the passing of the first anniversary of the revolution without any major incident.

Mohammed Omran, who took up the post of chairman at the exchange in March 2011, believes investors are more confident now amidst growing political clarity in the Arab state, and expects six to eight companies could launch initial public offerings in the coming months.

"If we continue witnessing some kind of stability and things are cooling down, I would expect in the third quarter or last quarter of this year, we will be able to have more [companies] listed," Omran told Zawya Dow Jones in a recent interview.

The companies that are talking to the exchange are from a "diversified" range of sectors, Omran said, but added that they are still "waiting to see whether it's the right time to jump into the market". He declined to name the companies that were considering an IPO.

The global financial crisis and the revolution last year significantly slowed down the number of IPOs in Egypt after oil services company Maridive (MOIL.CI) and real estate company Palm Hills Development (PHDC.CI) sold shares in the middle of 2008.

Concerns about the Arab state's economy remain--its foreign reserves, vital to pay for its imports, have dropped by more than half since early 2011 to about $16 billion at the end of January--as tourism revenues and foreign direct investment have plunged, also putting pressure on the country's currency.

The government now hopes to secure a $3.2 billion loan from the International Monetary Fund in March, which will help shore up its reserves and improve foreign confidence in the economy.

Despite these concerns, Omran voiced optimism that the exchange would hold on to its emerging market status at index compiler MSCI's annual review this year.

There were some investor concerns that Egypt could face a possible downgrade after the market was forced to shut for several weeks in early 2011 due to unrest in the country. A sharp drop in volumes and value further accentuated its woes.

But Omran says the market "is in much better shape than several months ago in terms of value and volume of trade."

"I'm thinking if we continue like this I don't see a reason why Egypt will leave the MSCI," he added.

Sukuk Boost

Omran expects the country's financial regulator to sign off a law amendment to allow companies to issue Islamic bonds, or sukuk, by the end of June, a move that is expected to boost market liquidity as it taps investor appetite for Islamic products.

Earlier this month, the Egyptian Financial Supervisory Authority, in a statement posted on the EFSA website, said it has submitted a draft to amend the country's capital market law to regulate sukuk and is awaiting approval from its board of directors and the minister of investment.

The Egyptian Exchange already allows companies to list conventional bonds, with the number of corporate bond issues listed on the exchange reaching 16 at the end of last year, according to a bourse spokesperson.

Omran also expects the rules and regulations that allow companies to offer rights issues to be enforced by June.

-By Farah Halime; Contributing to Dow Jones Newswires; Fhalime@gmail.com

Copyright (c) 2012 Dow Jones & Co.

(END) Dow Jones Newswires

23-02-12 0949GMT