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

2. 2 History & infra: Relatively Old & Well-developed CASE: Among oldest exchanges in region - Alexandria: established 1883, Cairo: 1903 - ranked 5 th 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. 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. 4 Stock Market: 2 nd 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. 5 Some Outstanding/Remaining Issues (1) Bond market: less developed Stock Market Structure - concentration of capitalization & trading -- largest 10-20 firms dominate - concentration of ownership / low free float

6. 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. 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. 8 Thank you!