A move by Orascom Construction Industries (OCI) to shift its primary exchange listing from Cairo to Amsterdam could have an adverse impact on Egyptian equities, analysts have warned.
And Egypt could lose prominence in the MSCI Emerging Markets Index or even fall out of the ranking altogether as the result of the delisting of OCI and other heavyweight stocks, analysts said.
OCI, which has moved its primary listing to NYSE Euronext Amsterdam as part of a US$2 billion (Dh7.34bn) share exchange, said it had received enough support from shareholders to make the vote binding in a statement on Friday. Shares in OCI started brightly on their Amsterdam bourse debut on Friday, rising 3.4 per cent to $40 in early trading.
The shares were listed as part of an exchange offer for outstanding global depositary receipts of parent company Orascom Construction Industries SAE.
Delisiting of the stock, which accounted for 24.3 per cent of the weighting of the EGX30 Index, was likely to contribute to a significant decrease in liquidity on the Egyptian stock exchange, analysts from Deutsche Bank wrote in a research report.
"Over the past year, apart from the political overhang, a number of companies have either been delisted or have seen a large reduction in their free-float or are in the process of moving their primarily listing on other non-Egypt exchanges," said the report.
"This in turn poses a risk of Egypt's weighting in the MSCI EM being further reduced or at worst Egypt losing its MSCI EM status altogether."
In addition to OCI, the Egyptian Company for Mobile Services (Mobinil) and EFG Hermes also face the possibility of delisting as a result of overseas acquisitions.
At present, Egypt accounts for about 0.3 per cent of the weighting of the MSCI Emerging Markets index. Egypt fought to maintain its position in the index during the revolution of 2011, during which its stock market closed for almost a month.
Although entry to the A-list of growth economies has been desired for many years by the UAE and Qatar, currently regarded as frontier markets, demotion from the index can sap international investment.
Pakistan's removal from the index in December 2008, for example, resulted in a hit to market liquidity. Some companies have sought to minimise their exposure to Egypt as a result of political tensions following the country's uprising.
Clashes rocked Egypt on Friday, leaving dozens dead on the anniversary of the start of the unrest that swept Hosni Mubarak from the presidential palace in 2011. Further rioting broke out yesterday after 21 death sentences were handed out to people involved in last year's Port Said football disaster.
However, Arabian Gulf investors are taking advantage of the country's depressed asset values to make acquisitions. Emirates NBD, Qatar National Bank and Majid Al Futtaim Holding are all increasing investment in Egypt.
MSCI could not be reached for comment outside of office hours.