Private companies seek growth after stagnant period

The upcoming weeks should see two major milestones for Egypt’s stock exchange.

Arabian Cement Company will announce prices for its initial public offering, or IPO, on May 10.

This will be the first IPO on Egypt’s stock exchange since November 2010, when real estate developer Amer Group sought to raise LE1.4 billion. That, in turn, was the second Egyptian IPOs since the beginning of the global financial crisis in 2008.

Arabian Cement Chief Executive Jose Maria Magrina told Reuters it has set an indicative price range between LE8.45 and LE9.55 per share, with trading to begin on or around Wednesday May 21.

Arabian Cement’s offering is likely to be followed by a string of other IPOs. Mercedes Benz distributor National Automotive Co., Ataka Steel and Carbon Petrochemicals have also announced plans to offer equity through Egypt’s stock exchange.

When established firms turn to the stock market to raise funds, it can be a sign of uncertainty about their future growth. Companies often prefer to borrow from banks if they are certain their profits will outstrip interest rates — a tall order with the Central Bank of Egypt’s benchmark lending rate holding steady at 9.25 percent.

However, after more than four years without new stocks in the market, the resurgence of IPOs are a sign that private companies are seeking to finance growth after a long period of stagnation.

The coming weeks should also see the launch of Egypt’s first exchange traded fund, or ETF.

Beltone Financial has been granted a license by Egypt’s bourse to create a new ETF called XT-Misr. The fund will trade like an ordinary stock but track the performance of the benchmark EGX-30 index, which includes Egypt’s top 30 traded companies in terms of liquidity and activity.

Beltone was the first company to express interest in creating an ETF after Egypt’s market regulator last month approved rules for the funds.

XT-Misr will be the first fund of its kind in Egypt and the Arab world, and shares will be available in LE10 units.

“XT-MISR should increase the volume of trading in the Egyptian Exchange and bring new investors to the market from Egypt and abroad,” said Maged Shawky, Chairman of the Egyptian Exchange, in a press statement.