The Egyptian Exchange has launched the EGX30 Capped Index on February, 2019. The index is designed to measure the performance of the most traded companies in accordance with the rules set for mutual funds, as is stated in Article 174 of the executive regulations of the Capital Market Law (95) of 1992.
EGX30 Capped Index sets a maximum percentage on the weight of the constituents that is determined by its adjusted market capitalization. Constituents are capped quarterly so that the weight of each constituent will not exceed 15% of the total weight. This would minimize the control of a limited number of constituents on the overall performance of the index.
The Egyptian Exchange started publishing the EGX30 Capped Index, which has a base date on 30 January 2003 and a base value of 1000 points. The index is designed to capture the performance of the most active 30 companies in terms of traded value and liquidity, while capping the weight of any constituent to a maximum of 15%.
EGX30 Capped constituents are rebalanced four times every year. At the 1st of February and at the 1st of August, comprehensive rebalances are undertaken to adjust constituents (added or deleted), if necessary, and to modify the Adjusted Weight Factor of the constituents. The comprehensive review is accomplished based on the above mentioned criteria and the results are presented to the EGX Index Committee for discussion and approval. At the 1st of May and the 1st of November, rebalances are undertaken to adjust only capping factors of the constituents without any modification in the constituents.
Mohamed Farid, EGX chairman said that launching EGX30 Capped index is in line with the requirements of the market participants, especially mutual fund managers who have the desire to have a benchmark index that complies with the investment criteria.
He added that the methodology of setting maximum weight for the index constituents is one of the approaches adopted by many international institutions like Dow Jones, FTSE, MSCI and S&P.