Exchange traded funds (ETFs) are as successful as Egyptian Exchange benchmark index EGX-30 is, investment manager at Beltone Financial Alyaa Gomaa said.
Beltone Financial was the first company to be granted the ETFs trading license in Egypt. The company launched a fund called XT-Misr that mirrors the performance of the country’s EGX 30 stock index.
“It doesn’t make sense for ETFs to do well when representing the market and the market is not doing well,” she said. “I cannot outperform the market”.
The past year there were several initial public offerings for private companies but the overall stock prices dropped notably. Since the beginning of 2016, the Egyptian capital market has been suffering a decline.
Egyptian Exchange’s (EGX) benchmark index EGX-30 dropped by 14.46% in January, declining from 7,006 points to 5,992.7 points. The market’s capital decline during the same period was 9% and amounted to EGP 391bn.
Beltone Financial’s executive said that most of the effort was done before the introduction of ETFs and it took the company eight years to finalise the ETFs vision and regulatory changes. The company launched a marketing campaign to promote the ETFs and raise awareness for it. Trading on ETFs started in January 2016.
In a recent interview, Chairman of Egyptian Exchange (EGX) Mohamed Omran said ETFs were introduced in “difficult circumstance”, referring to liquidity shortage in the market and previously announced and halted capital gains tax.
“It is unfair to judge its [ETFs] performance in light of those circumstances and slow growth rates,” Omran said.