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EGX launches its Equally Weighted Index EGX70EWI Today
02/02/2020
EGX70EWI includes top 70 companies in terms of liquidity and
activity after excluding the constituents of EGX30 and deleting the current
EGX70 Index. The Equal weight index methodology is one of the approaches
adopted by many international institutions. This Index was adopted after
deliberations held with all market participants.
The Egyptian Exchange launches its equally weighted index EGX70EWI today,
02 February 2020.
The index calculation started on 2nd of January 2008 with
value of 1000 points. Every company in the EGX70EWI have a weight of 1.43% at
each quarterly review.
The new Index increasing the chance of developing financial
products such as Exchange Traded Funds, as the index is a good tool for
financial institutions to issue Exchange traded funds, or mutual funds that
could track the index performance passively “Index Tracking”. The index is also in line with the
requirements of the market participants, especially mutual fund managers looking
for a benchmark index that use equal weight method. The index complies with the
amended percentage mentioned in the executive regulations of the capital market
law and this would contribute to the promotion of the of mutual funds’
performance.
Mohamed Farid Saleh, Executive Chairman of EGX said that the methodology for
calculating the new index is one of the approaches adopted by many
international institutions that issue indicators reflecting its companies’
performance which is a better indicator of their price performance.
The Egyptian Exchange (EGX) launched in February 2019 index
of determined weights "EGX 30 Capped", which includes the 30 most
active companies in terms of liquidity and activity, while the market
capitalization weighted by free float ratio determines the weight of each
company in the index.
The "EGX 30 Capped" is featured by it’s weights’
determined, the maximum weight of each company within the index is 15% at the
quarterly review of weights to limit the dominance of a limited number of
companies on the index activity.
The methodology of this index is consistent with the
amendments of Chapter 3 of the Executive Regulations of the Capital Market Law
promulgated by Law No. 95 of 1992 on investment policies of the investment
funds, which helps investment managers and shareholders to measure their
performance. It is also consistent with
Article 174 (Fund’ investment policy) of chapter 2 (Investment Funds), which
states that "the proportion of investment in the purchase of securities of
one company shall not exceed 15% of the net assets of the Fund and not more
than 20% of the company’ securities ", which is an update to Article No.
149 of Chapter 2 (Investment Funds) of part Three of the Executive Regulations
of the Capital Market Law promulgated by Law No. 95 of 1992, which stipulates
that" Investing the investment funds’ proceeds in securities shall be in
accordance with the terms and conditions that states the percentage of
investment in purchasing one company’s securities should not exceed 10% of the
fund’ proceeds and no more than 15% of the total securities of that
company."
Also in August 2019, EGX launched its EGX30
TR Index that includes top 30 companies in terms of liquidity and activity and
it is weighted by the adjusted free floated market capitalization. EGX 30 TR
avoids concentration on one industry/sector and therefore has a good
representation of various industries/sectors in the economy.
For more information about the EGX70EWI Index, please
check this link
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