Egypt seen activating bond trading platform in Q2
5 February 2014
Mohamed Omran, Chairman of the Egyptian Stock Exchange announced on January 21, 2014 that the long awaited electronic bond trading system would be operational in the second quarter of 2014.
Omran further added, "We hope to activate the bonds market in the second quarter of this year. The file is now with the central bank to come to an agreement with banks on how to issue certain percentages of the bonds for trading,"
Currently, a small number of government and corporate bonds trade on the Egyptian stock exchange.
In 2012, the value traded of bonds reached LE 38 billion compared to LE 31 billion in 2011 with the volume of 2012 trades at 37.5 million bonds. The majority of the bonds listed on the Exchange are government bonds (approximately 97% of the market). The Egyptian government bond market has seen a number of significant developments over the last 7 years. The first major achievement was in reformulating the issuance policy on benchmark securities. This policy was initially implemented in the T-bill market with the re-opening of 9 and 12 months maturities. It was then extended to the T-bond market by auctioning standard maturities, decreasing the number of lines and issuing larger amounts.
The market also saw the issuance of new types of instruments including FRNs as of September 2012 carrying a two year maturity and Zero coupon bonds launched in 2013.
In the Egyptian market, Treasury Bills remain the most actively traded fixed income instruments. The Treasury Bond portfolio currently stands at EGP 323 billion as of November 30, 2013.
Egypt has a small corporate bond market with limited market activity. As of Jan 2014, there were 19 corporate bonds listed on the Egyptian stock exchange.
There is still of lack of liquidity in the secondary market for T-bonds as well as the market for corporate bonds. Once banks and investors buy government securities, they tend to hold onto them until maturity.
The bond trading platform could make it easier for investors to buy and sell securities on the bourse and help to increase trading activity.
Amongst other reforms to attract companies and increase turnover, the Egyptian stock exchange is revising listing regulations in addition to developing new mechanisms for exchange-traded funds (ETF) and rights issues.