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egistering fund certificates in EGX to allow investors to compare market and book values

This will lead to radical change in regulating items for funding activities in executive regulations of the Market Law as well as those of IPO.
26.09.16 | Source: MENAFN

A number of assets managers confirmed that the Egyptian Financial Services Authority (EFSA) and the Egyptian Exchange (EGX) are reopening the registration file for investment fund certificates, instead of limiting bank purchases, sale transactions, and sales. This will lead to a radical change in regulating items for funding activities in executive regulations of the Capital Market Law as well as those of the Initial Public Offering (IPO) prospectus. These amendments may extend to the law itself, as well as change fund system operations.
The managers explained that certificates registration will create two values for them: market value, which is determined by purchase and sale offers, and book value, which is calculated by net assets value.

They pointed out that security brokerage firms will be a new party in implementing purchase and sale orders in the EGX, as well as the ability to save the certificates in parties that hold the trustees' licence rather than banks. This will lead to amending the Capital Market Law.

Adel Kamel, investment manager and managing director of assets in Pharos Holding Company, said that reviving the file related to registering investment fund certificates in the EGX will be accompanied by amendments to the rules regulating funding activities in the executive regulations to the Capital Market Law, IPO's prospectus, and the certificates saving, buying, selling, and settlement systems.

Kamel explained that according to the current system of investment fund operations, the value of certificates is evaluated weekly through a service management company by calculating the certificate book value [dividing the value of the fund's net assets by the number of certificates].

Certificate holders have the right to retrieve the value of the certificate on Sundays through the bank. Other investors can buy one of these certificates through the bank as well.

He pointed out that while registering certificates in the EGX, investors will be allowed to buy and sell on the trading screen directly without going to the bank, what will lead to creating market and book values.

The market movement will determine the price of the investment fund's certificate. For example, if the certificate's inventory rate reaches EGP 50, but the certificates holders expect that the EGX will fall the next day, they would sell their certificates for lower than EGP 50 to attract purchasers.