Tick tock, tick tock.
Egypt faces another problem.
If the Cairo stock exchange does not reopen by the end of the next week, it could be kicked out of the MSCI regional indices (that’s Emerging Markets, All-Country World, EMEA and Arabian Markets ex-Saudi).
So what you might say. Does it really matter?
In a word, yes. ETFs, index funds and any passive investors benchmarked against the MSCI indices would be forced to sell equities, says Citigroup.
How much might foreigners be looking to sell? Current free float of the MSCI Egypt index was $14.3b as of the close in late January. Assuming that 25% of free float is owned by foreigners, and discounting share prices by 20% in-line with the move in GDRs, we arrive at around $3b of Egyptian stock that is held by foreign investors who could be looking to sell. Of this, we estimate about 20% ($600m) is owned by passive investors and the rest by active funds.
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