The Egyptian Stock Exchange (EGX) has been experiencing fluctuations in performance, largely due to global and regional tensions impacting markets worldwide. Notably, the severe losses on “Black Monday” in August echoed the global financial crisis of 2008, as major indices like the Dow Jones Industrial Average and S&P 500 faced steep declines following a significant drop in the Japanese Nikkei index. Concerns about China’s economic slowdown further fueled this deterioration.
In response, the Egyptian government recently announced a delay in implementing the capital gains tax on profits from shares and stakes listed on the EGX. Initially scheduled to take effect in March/April 2025, this decision was communicated by Minister of Investment and Foreign Trade Hassan ElKhatib.
This shift follows the government’s earlier decision in June to introduce the tax, aiming to boost the EGX and support its tax collection targets for the fiscal year 2024/2025, which began on July 1.
Egypt aims for general revenues of EGP 2.6 trillion in FY2024/2025, representing a 22.5% increase from the EGP 2.1 trillion achieved in FY2023/2024. Tax revenues are expected to grow by 32.1%, reaching over EGP 2 trillion, up from EGP 1.5 trillion in the previous fiscal year. If achieved, this target would be the highest in nearly seven years.
Business Monthly spoke with financial market experts about the current performance of the EGX and its outlook through the end of 2024.
Speaking to Business Monthly, stock and financial markets expert Hossam Elghayish noted that the EGX saw an unprecedented influx of new investors in 2023, reaching 329,000—an 84.4% increase from about 178,000 in 2022 and a significant rise from 58,000 in 2021, 24,000 in 2020, and 28,000 in 2019. These figures indicate a healthy performance for the EGX.
Additionally, the value of trading in stocks, bonds, and treasury bills on the exchange surged to EGP 2.4 trillion during the second quarter (Q2) of 2024, with a trading volume of 44.5 million shares. This marks a dramatic increase from EGP 179.8 million in the same quarter last year, when the trading volume was 44,000 shares. The growth rates reflect an impressive 1240.2% increase in trading value and a slight 0.2% increase in trading volume, according to Elghayish.
Elghayish explained that the value of stock trading increased by 44.3% during the second quarter of 2024. This growth is attributed to government measures implementing structural reforms and enhancing the role of the private sector. Additionally, the Financial Regulatory Authority’s initiatives to stimulate the markets, along with the Central Bank of Egypt’s successive decisions to reduce the exchange rate of the Egyptian pound against the dollar, have helped restore investor confidence in the EGX and boost trading activity.
The value of trading in bonds and treasury bills surged to approximately EGP 2.213 trillion during the second quarter of 2024, reflecting an unprecedented increase of 4978% compared to the same period in 2023. This dramatic growth is attributed to the introduction of trading in bonds and treasury bills on the EGX, which began in September 2023, according to Elghayish.
The main index, “EGX30,” rose from 17,665.29 points at the end of June 2023 to 27,766.27 points at the end of June 2024, achieving a growth rate of 57.18%. Similarly, the “EGX70” index for small and medium-sized companies increased from 3,535.71 points to 6,194.17 points, reflecting a growth rate of 75.19%.
The broader index, “EGX100,” jumped from 5,242.31 points to 8,985.15 points, with a growth rate of 71.40%. Meanwhile, the Tamyiz index grew from 5,361.91 points to 6,558.19 points, marking a 22.31% increase.
Additionally, the market capitalization of shares listed in the intra-market reached approximately EGP 1.9 trillion at the end of Q2 2024, representing a 61.46% increase compared to the same period the previous year. The ratio of market capitalization to GDP also rose to about 18.5%, the highest since 2017.
However, Elghayish noted a decline in the number of new investors in the EGX, which fell to 31,000 in Q2 2024, down from 80,000 in the same period a year earlier. Among the new investors, 30.64 thousand were individual investors, while 475 were institutional investors.
Reasons behind the decline
“There are many factors that impacted the activity of the EGX, the most prominent of which was the application of the capital gains tax. This tax has been a major concern for financial policymakers and decision-makers in Egypt, as it does not align with the nature of the Egyptian stock market as an emerging market seeking to attract investments. Additionally, the tax amount was not clearly defined for investors,” Elghayish explained.
Stock market expert Hanin El-Mahdy told Business Monthly that the EGX30 index broke out of its downward trend channel in May, following corrections related to the devaluation of the Egyptian pound, while the market was largely influenced by the parallel currency market.
“Despite this, the index faced several challenges during the first half of 2024, including a natural gas shortage affecting the petrochemicals sector and EGX30-listed companies, escalating geopolitical conflicts near the Rafah borders, and the significant downturn on ‘Black Monday,’ which saw the index drop to 27,125 points. Nevertheless, we expect the EGX30 to maintain its upward trend and potentially revisit historical highs,” El-Mahdy emphasized.
Outlook
Looking ahead, Elghayish told Business Monthly that the EGX is expected to attract significant liquidity in the coming months, particularly as there is a trend toward reducing interest rates both globally and locally.
“This will help boost liquidity. Laws related to the fair value of companies—based on their market value rather than book value—will aid in re-evaluating the assets of companies listed on the Stock Exchange. This change is likely to increase purchasing activity in stocks, especially from institutional investors, in the near future,” he said.
Key factors supporting this positive trajectory, according to El-Mahdy, include the repeal of the capital gains tax, which is expected to enhance market performance by attracting both new and existing domestic investors. Additionally, the anticipated shift by the Federal Reserve toward monetary easing could lead to capital inflow from the U.S. into emerging markets, including Egypt.
The upcoming release of Q3 financial results and the Central Bank of Egypt’s potential monetary easing, expected during the Monetary Policy Committee’s December meeting or in Q1 2025, will also play a role, depending on the outcome of the IMF’s fourth review and the Petroleum Pricing Committee’s October meeting.
“However, external risks, such as the intensification of the Israeli-Gaza conflict, could adversely impact the Egyptian economy and its stock market,” El-Mahdy warned.
Looking ahead, she noted that the EGX30 index is expected to target key levels at 30,700, 32,220, and 34,500.
“If it breaks through these points, it could potentially reach new historical highs at 35,000 and 36,400. The index must hold above the key support level of 29,400, as a drop below this could trigger substantial selling pressure,” she explained.
For the EGX70, El-Mahdy projected targets of 7,116, 7,338, 7,565, and 7,905. If the index surpasses the last target, it may reach a new all-time high at 8,200.
“To maintain positive momentum, the index must stay above the support level of 6,922. Currently, market activity is driven by purchases from Egyptian institutions and high-net-worth individuals. However, if external risks ease and the capital gains tax is swiftly eliminated, we expect market leadership to shift toward foreign and Arab institutions, as well as Egyptian investors with low to mid-level net worth,” El-Mahdy predicted.
