CAIRO: This is a transformative time for Egypt’s securities markets. In the midst of a volatile year on the exchange, the markets continue to expand both in the products they offer and in the companies they have opened up to.
A panel discussion titled “How to learn to stop worrying and love risk at Euromoney Tuesday convened to discuss developments in the securities markets and what they could mean for investors.
The first question, of course, focused on the markets’ recent volatility.
“You manage volatility through the instruments you have, said Gamal Khalifa, chairman and CEO of Edge Portfolio Management, stressing against investor overreaction.
The panel then went on to discuss the NileX small cap exchange as a means of measuring the progress of recovery. While prices have been down this year, Egyptian Exchange Chairman Maged Shawky argued that prices are a poor measurement of success in an economic environment like this one.
“After one year of the crisis, he said, “volume is coming back.
Before hoping for prices to increase, Shawky explained, investors have to hope for a return of investment appetite. The first piece in the recovery puzzle, he said, was in place.
Shawky was also asked about derivatives. Before the onset of the economic crisis, the NileX had begun to implement plans that would lead to the introduction of derivatives in the market.
Many today blame the onset of the economic crisis primarily on derivatives and argue that they should be excluded from the exchange.
Shawky said that his messaging campaign had been set back somewhat and some were now more reticent to engage in derivatives. He claimed that from a legal point of view, though, the exchange is still on track to introduce derivatives to the market.
Some at Euromoney have not argued against derivatives but said that the proper regulatory framework must be in place before the authorities open the door to this tool; and the same applies to short-selling.
The panel also discussed the imperative of winning the message campaign with derivatives. One mentioned that many derivatives are simple and harmless to broader economic stability. Another said that derivatives were an important tool in the establishment of a balanced portfolio.
The conversation over derivatives highlighted a critical theme of the conference, which is how Egypt, whose economy is in a rapid state of transformation, should interact with the global economy, which is undergoing major upheaval.
These two unpredictable variables have left economic leaders in search of a new direction.