By Ehab Farouk
CAIRO (Reuters) - Egypt's financial market regulator, seeking to attract capital back to the stock market, has released rules to facilitate the creation of index and real estate funds as well as amendments to margin trading rules.
Sherif Samy, head of the Egyptian Financial Supervisory Authority, said the changes would increase liquidity in the market and draw more local and foreign investors.
The main stock market index has soared 63 percent since early July last year, surpassing its level before Egypt's 2011 revolution. But the buying has been led by individual investors; many local and foreign institutions remain cautious after years of economic and political turmoil.
Index funds, which seek to track the movements of a market index, are less risky than other funds because they invest across the market and are not based on a single fund manager's view, Samy said. Also, they tend to involve lower costs.
"We plan to launch Egypt's first index fund in April," Samy said, adding that such funds would support the development of market makers - dealers who stand ready to buy and sell stocks in order to ensure liquidity - within Egypt's market.
Egypt's Beltone Financial Holding requested permission to launch an index fund in the country in 2008, before the global financial crisis intervened.
Osama Rashad, head of investor relations at Beltone, told Reuters that his firm was now reviving the plan. "We have the investment prospectus ready to present to the EFSA and as soon as the necessary procedures are completed, we will launch the fund. We aim to launch the fund by the end of April."
On real estate funds, Samy said the rules included permissible levels for income-generating assets as a percentage of each fund's total assets.
Margin trading rules have been amended "to give brokerage firms greater authority in managing their risks and to curb the phenomenon of small firms extending credit to clients outside the system adopted by the EFSA," he said.