EGX reviews EGX30 index methodology

CAIRO – 19 January 2021: The Egyptian Exchange (EGX) Monday reviewing EGX30 methodology to maintain its stability and investment attractiveness and contribute further to improving the relative distribution of companies within the index.

EGX said that the modified methodology requires the value of the adjusted market capitalization to be not less than the median of the adjusted market capitalization for the top 60 companies in terms of liquidity.  

“This is to ensure that companies with high liquidity are well represented, which also maintains the attractiveness of the index to invest domestically and globally,” it clarified.

According to EGX, the amendment seeks more stability in the components of the index and is in line with the best global practices, where companies will be ranked in terms of liquidity. This is followed by applying the buffer Rule, All companies ranked in the top 27 as per the liquidity screening process. Next, any current constituent companies remaining within the top 33 are re-selected for index inclusion, in order by rank, until the 30 company target count has been reached. If the target count still has not been reached, the highest-ranking non-constituents are selected until 30 companies are included.

"This rule enhances the stability of the components of the index and limits the possibility of a large number of companies exiting the index during the single review. In addition to excluding companies that announced their liquidation, or disclosed their probability of liquidation," it added.

Executive Chairman of EGX Mohamed Farid, said that the amendment done on EGX30 methodology aims to have a more stable index, enhance its investment attractiveness, as well as contributing to improving the relative distribution rates of the companies that make up the index.  This is done in line with international practices.  

He added that the new methodology of the index, includes a combination between liquidity and the size of the company, which is "market capital weighted by free trading".

EGX added its amendment to EGX30 to its EGX50EWI, EGX70EWI, EGX100EWI indices.  EGX’s Indices constituents are reviewed on semi-annual base (1st of February and 1st of August) by EGX Index Committee, whereby constituents are changed (added or deleted), if necessary, based on the above mentioned criteria.