CMA to authorise exchange traded funds

Egypt’s Capital Market Authority (CMA) stated Wednesday its goal to authorise exchange traded funds during the last quarter of the current fiscal year, in an attempt to increase liquidity and attract new investors onto the local market.

Sharif Sami, Chairman of the Egyptian Financial Supervisory Authority (EFSA), said in a phone interview with Reuters: “I don’t think it will take more than two or three weeks to activate exchange traded funds on the Egyptian market; however our stated goal is to do so during the fourth quarter of the current fiscal year, if no unforeseen events prevent us from doing so.”

Exchange traded funds serve as open investment funds which follow the movement of specific indicators, listing and trading their supplementary documents on the stock market as shares and bonds.

Sami added that, “Exchange traded funds will help inject high rates of liquidity into the market and attract new investors”.

Egypt’s stock exchange has been suffering from low rates of liquidity since the worldwide economic recession of 2008, the effects of which were exacerbated after the outbreak of the 25 January Revolution.

“Exchange traded funds are less dangerous than other funds, as by investing in them you are able to invest in an entire market,” Sami explained. “Investments are not directed based on the vision of a fund manager, who may be right or wrong in his assessments. Furthermore, the risks and burdens bore by investors seeking to put their money in exchange traded funds are generally less”.

Beltone Financial was perhaps the first institution to call for the release of exchange traded funds within Egypt towards the end of 2008, before the outbreak of the world financial crisis. The company at the time began to distribute initial public offerings (IPO) funds to the EFSA, however such funds have not yet been authorized.

Osama Rashad, Director of Investor Relations at Belton Financial stated on Wednesday that, “Beltone is still interested in the release of exchange traded funds, and we continue to hold meetings with the EFSA to pursue this end.”

“We hope to increase the number of assets we administer in addition to attracting new investors, and for this reason we are interested in exchange traded funds. The market is desperately in need of new instruments and tools.”

Exchange traded funds provide investors the opportunity to cover entire markets in various countries and sectors, at a cheaper rate than other means of investing.

Translated from Al Borsa newspaper

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