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Egypt: Reviving an old institution

Like many old bourses in emerging markets, the one in Cairo creaks a bit. Transforming it into a smooth-running, well-oiled machine will require changing attitudes as well as systems. But the need to attract foreign and domestic money to the corporate sector will probably ensure it comes right in the end. Nigel Ash reports.

"What is true for London, Paris or New York is not necessarily true for Egypt. You cannot have a market that has been closed and mothballed for decades turn back overnight into a problem-free market."

This comment by an Egyptian banker on attempts to modernize the Cairo Stock Exchange (CSE) reveals the full extent of the challenge ahead. It is not the establishment of new systems and regulations, difficult as these are, that is the main problem facing the reformers: it is the hidebound ways of the borrowers, the investors and the stockbrokers which are the most resistant to change. Until they do change, the full potential of the CSE cannot be realized: it has a tiny $5 billion market capitalization and consists of 700 companies, of which only 40 are actively traded.

"Almost nothing exists. Companies do not go and raise capital on the stock market. They do not even think about it," continues Mohamed Ozalp, whose Misr International Bank (MIBank) owns a share of a new broker El Rawad.

As for investors, Ozalp points out, along with many other commentators, that Egyptians are used to tangible assets such as property and gold. Shares and bonds are not regarded as intrinsically valuable - a perception that is likely to be reaffirmed rather than dispelled by the proposed automation of trading and settlement.

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