1. Capital Markets in Egypt
Some personal thoughts:
Yosuke KAWAKAMI, DAF

2. History & infra: Relatively Old & Well-developed
CASE: Among oldest exchanges in region
- Alexandria: established 1883, Cairo: 1903
- ranked 5th in the world in1940s
However, capital markets languished post WW2
- central planning and nationalization during 1950’s -60’s
CMA: established in late 1970’s
1991: Start of economic reforms
1992: Capital Market Law
1994: Start of privatization

3. Recent Macro & Structural Reforms have led to Capital Market Development
Macroeconomic Stabilization & Improved Performance
- Transition to unified flexible FX rate regime (Dec.2004)
-- subsequent stabilization
- strengthened external position
Structural Reforms
- Privatization
- Financial Market Reform
-- Recent capital market reforms:
e.g. automated trading, primary dealership, “One-stop Shop”

4. Stock Market: 2nd in size among MENA
CASE index: 3-fold rise from end-2004 to early-2006
Market value: 70% of GDP (as of Sept. 2005)
--- doubled in two years
However, market fragile: 16% drop on 14 March 2006
Have withstood recent MENA downturns better

5. Some Outstanding/Remaining Issues (1)
Bond market: less developed
Stock Market Structure
- concentration of capitalization & trading
-- largest firms dominate
- concentration of ownership / low free float

6. Some Outstanding/Remaining Issues (2)
Institutional Issues
- Corporate governance
-- development of CG Code & Guidelines for CG of SOEs
-- establishment of Institute of Directors
- Strengthening insider-trading rules
- Derivative instruments: provide hedging tools & help increase liquidity
-- general principles of law provide legal basis
(although no specific legal framework exist under Egyptian law)

7. Some Outstanding/Remaining Issues (3)
Capital Market Promotion & Development
- Promoting privatized share sales to general public
- Promoting development of institutional investors
-- further reform of insurance & pension sectors useful
- MBS (ABS) development
-- conversion of mortgages (which the gov't is promoting)

8. Thank you!