The Index Committee at the Egyptian Exchange (EGX) has adopted the Tamayoz index methodology, which includes a sample of companies whose securities are listed on the small and medium enterprises (SMEs) market.
The adoption will take place provided that the new index will be launched within a matter of days.
The listing methodology that makes up the index was based on several criteria, including: measuring the strength and quality of financial and operational performance, in terms of the compound growth rate of revenues on an annual basis generated from the main activity; cash flows from operating; in addition to other indicators that were used to evaluate the performance of these companies.
The Index, which will measure the performance of the SMEs market during trading sessions, includes eight companies that will be announced with the official launch. It is considered to have started from 1 January 2019, at a value of 1,000 points.
EGX Chairperson Mohamed Farid said that the new index will truly reflect the performance and movement of the market. It will also allow investment managers to issue financial products that track the index, and evaluate their investment portfolios on the basis of the index.
This relates particularly to the maximum relative weight of a single company within the new index, which is 35%. The limit rests on the basis of market capitalisation weighted by free-traded shares, which can prevent a limited number of companies from controlling the movement of the index. It also means that it is more reflective of the movement of the market as a whole.
Farid said that within a few days, the EGX will take an executive decision to oblige companies whose securities are listed on the SME market list to contract with an approved and registered sponsor to start the restructuring plan.
It includes obliging the sponsor to assist SME market listed companies to develop and build the capabilities of investor relations. This aims to create professional communication with shareholders and investment institutions through conferences to announce and analyse the financial statements on a quarterly basis.
The plan also includes the sponsor’s commitment to providing research coverage through research coverage companies, which contributes to attracting more institutional Investments and activating and enhancing liquidity and trading.
Othman explained that completing Tamayoz Index is a step within the comprehensive restructuring plan for the SMEs market, which EGX launched two years ago.