Promoting Investor

Awareness in Egypt

Hesham IbrahimChief of Chairman’s Technical

Affairs SectorCapital Market Authority,

March 2nd, 2009

Milestones of the Egyptian Capital Market

Year 1856: First Joint Stock Company was established. Year 1867: Government Securities were introduced for the first time. Year 1888: Alexandria Stock Exchange was established followed by

the Cairo Stock Exchange in year 1903; the two were later merged . in 1907: 228 listed companies with market cap of 91 EGP Million. During the 1940’s, CASE was the 5th most active stock exchange. Starting Year 1961, stock exchange activities were greatly decreased

which coincides with Nationalization & Socialism Movement period. Year 1979: Capital Market Authority (CMA) was established as an

independent regulator to regulate the Egyptian Securities Market.

Milstones of the Egyptian Capital Market

Year 1992: Capital Market Law was issued as first step to reorganize and reactivate the Egyptian Capital Market.

Currently, all market institutions have been established and regulated. No. of investors in 2009 has exceeded 1.6 million investor. 22nd of February, 2009: the Egyptian parliament has approved an act to

establish the “Egyptian Financial Services Authority” for all non-banking financial institutions.

The government is working currently on a massive distribution program for ownership of privatized companies that 41 million Egyptian citizens will benefit from, by receiving “Public Ownership Sukuk” which represent a share in government owned enterprises‘ portfolio.

This represents different type of challenge to the CMA

The Need to Educate the Egyptian Investor. Why ?

In general, securities markets are more complex and volatile than other

markets especially after the Financial Crisis and how it reflected to the

economic status of the world and to the securities market in Egypt.

Investors need to be well informed in order to undertake efficient decisions

about various investment products in the market and avoid market scams.

Also Investors need to learn taking the responsibility for their financial

decisions. The regulator is always blamed for their bad investment decisions ,

illiteracy, and misconducts.

Education helps improving financial literacy of investors.

The most effective investor protection starts with a “well informed & educated

investor”.

The quality of the market depends on the quality of the investor.

41 million Egyptian citizens are soon to be in need to learn their rights &

duties, the role of each of Capital Markets institutions.

Who Are the Investors of the Egyptian Market? A. Majority of Market Participants are

individuals

Retail investors (locals & foreigners) constitute 63% of the market

69% of retail investors are Egyptians 70% of foreigners are non-Arab investors (they are

mainly educated and investing in blue-chips)

B. Behavior of Under-educated & Uninformed Investors has high impact on the market

Local Investors: chase rumors; follow the herd (i.e. mass selling when

foreigners start liquidating their portfolios) ; go after promises from scams’ professionals

(not licensed) who promise unrealistic returns resulting in huge losses that may even go

beyond their risk tolerance levels.

Uninformed investors sometimes fall victim to different types of market misconduct, e.g. integrity risks, brokers’ malpractices…

Therefore, CMA has special interest in educating

Investors

Retail vs. Institutes Share of Value Traded

Institutes37%

Retail63%

Source: CMA

Egyptians vs. Foreigners Share of Value Traded

Egyptians69%

Foreigners31%

Source: CMA

Our Role As the Capital Market Regulator

To promote public understanding of: The securities industry The benefits, risks and liabilities associated with securities investment The importance of making informed decisions regarding their transactions or activities Taking responsibility for their decision

To help investors: Obtain the key facts Understand the nature of different securities products Identify the various choices available Recognize the pros and cons of alternative types of product or service

To encourage investors to: Set clear, realistic objectives Assess their risk tolerance Ask the right questions Choose the investments that suit their needs Invest wisely Properly exercise their rights

Our Strategy to Educate the Egyptian Investor

Investors should learn about: various opportunities and investment products in the Egyptian Market, and

risks associated with each product; how to avoid falling into scams; channels of communications with all market institutions; and furthermore, we are proactive when it comes to problem solving &

handling crises ( CMA has changed its regulatory approach from “compliance-based approach” to “risk-based approach”)

We Set Our IE Programs to Cover:

Financial crisis: The effect of the turmoil and the rapid price falls

Combating illegal activities and misconducts: Unlicensed intermediaries

Money Laundering

Various channels of investor protection schemes: Investor protection fund (investor rights and obligations in case of

insolvency & bankruptcy)

Mutual Funds: Low Risk Easy to buy and follow up Managed by professionals

Our IE Structured Programs

Through IFIE, we have visited several IE institutions in the U.S in 2008 to: Establish communication channels Share our experience in the IE field Learn how to set long term IE strategy and plans

The visit included the following institutions: FINRA Investor Education Foundation SEC’s Office of Investor Education and Advocacy SEC SIFMA Foundation Education Foundation at Investment Company Institute Alliance for Investor Education

Our IE Structured Programs

We have designed a variety of structured programs accordingly:

Launched the “I invest” campaign in May 2008 by: Publishing the New Educational Website of the CMA

“www.iinvest.org.eg” - all in Arabic language as a first phase Publishing series of “I invest” booklets, flyers and brochures on

investment-related issues for the general public. Marketing the “I invest” brand by sponsoring events specialized for

educating investors.

Publishing the Financial and Legislative Encyclopedias: This encyclopedia includes all laws, regulations and decisions issued by the

CMA that regulate the Capital Market. In addition to this, it is considered as an important reference in which all professionals in legal and financial areas and all parties dealing with the CMA depend on.

Communication Channels

“I invest” Campaign was launched first in May 2008 aiming at

delivering the following message to our target audience:

“Prospering Your Financial Knowledge”

The campaign started with launching the educational website www.iinvest.org.eg

The website is aimed to act as an online window on all the information the Egyptian

investor need to know about not only investing in the Egyptian Stock Market but also

on the importance of saving, the financial planning, understanding different economic

indicators that can affect the environment of the investing.

Communication Channels (Cont,)

The website www.iInvest.org.eg includes different sections that are of important interest to both potential and current investors who invest in securities market. The sections are as follows: Tip & term of the day. Educational corner: where the educational material is divided into three levels

that starts with the basics of savings and investing for the beginners, then material for those interested in investing in securities and the last level of the material dedicated to experienced investors teaching them about hedging techniques.

Market performance data: where it provides the investors with the historical and daily performance of the Egyptian SE and CASE 30 performance.

Alerts and warnings: to warn investors about the latest market scams and how to avoid them.

Mutual Funds: it’s a dedicated section to promote the mutual funds to the small investors and list of the current mutual funds in the market and its updated performance.

List of the licensed brokerage firms and branches. Publications: it includes PDF documents about the CMA publications dedicated

to investor awareness.

Communication Channels (Cont,)

Other Communication channels: Press Forums Press and media staff training programs (they have a

great role in promoting market stability, integrity, raising investment awareness for all segments of investors)

Specialized training programs (CMA, EGX, and MCDR) Investors’ relations training programs Investor awareness call center (soon to be automated) Trading simulation programs Student targeting programs

Communication Channels (Cont,)

Publications: Foreign investors

Identifying investment environment Malpractice

In dealing and trading In identifying suitable investment professional In investing strategy

Issuers and intermediaries guidelines New products New rules

Investor awareness Free brochures, leaflets and articles in print media on investment-

related issues for the general public Investment schemes and channels New financial products and services

Thank You