CAIRO // The Egyptian stock exchange reached another milestone in a tumultuous year last week after a permanent chairman was appointed in an attempt to generate some stability in the country's equities market.
But analysts and stock brokers say the new head of the bourse, Mohammed Abdel Gawad Omran, has a difficult task ahead of him as he inherits a multitude of problems largely driven by political instability in Egypt.
Mr Omran, who was the deputy chairman of the Egyptian Exchange under Maged Shawky from 2006 to last year, takes over from Mohamed Abdel Salam who has been the acting head since the bourse reopened at the end of March after an almost two-month closure during the revolution.
Despite caution on what lies ahead for Mr Omran, many have welcomed his appointment, especially because of his close links to the country's stock market.
Even so, he will have to contend with a host of difficulties regarding the operation of the stock market.
"He came in a very challenging period of time in Egypt both economically and politically, and the outside world doesn't help [with] the US downgrade and the European credit dilemma," said Hesham Saad, an investment director based in Cairo at Silk Invest.
Mr Saad said Mr Omran arrived at time of "paradigm shift" for the EGX 30, Cairo's benchmark index, but added confidence needed to be restored to stock market players who felt jaded by the transitional government's delay on reopening the market this year.
"It looked like the government was not really interested in the market and didn't care much about traders," he said.
The regulator and the central bank, with the transitional government, made a decision to re-open the market just in time to prevent the Egyptian index from being removed from the MSCI's emerging market index. The government also pumped millions of Egyptian pounds into the exchange to limit the shock of a dramatic fall in stock prices, although it did little to keep investors from fleeing the market. Egyptian shares tumbled to a two-year low when the exchange reopened in March, and have struggled to regain steady momentum since.
In addition, extremely low volumes of daily traded shares on the bourse have plagued the market, and stand at just a fraction of the 1.5 billion traded before the uprising - averaging just 300 million shares each day.
The country's regulator, the Egyptian financial supervisory authority has also been criticised for suspending same-day trading, where securities are delivered and cash received on the same day, in February as a precautionary measure to limit the amount of money lost by investors. Calls are now being made by brokerage firms to resume the practice.
"I think [the new chairman's] major targets will be to increase liquidity by adding more products and enhancing productivity of current products" said Ayman Hamed, the managing director of Naeem Brokerage in Cairo.
Mr Hamed said one way to revive liquidity was to resume same-day trading, otherwise called delivery versus payment. He said such measures would bring the market up to international standards.
"We just have 100 stocks that we can apply same-day trading to, so widening this, plus new listings on the exchange, would help a lot."
The narrow bond market that includes only selected Egyptian stocks, the lack of any exchange-traded funds - a group of securities or commodities that track indices but trade like stocks - and limits on margin trading for investors are all issues that need to be addressed if the Egyptian market is to meet international standards and convince both local and regional investors to get involved, Mr Hamed said.
The stock market regulator eased rules on margin calls by brokerages to limit volatility, by requesting investors to pay more collateral when the client's debt reaches 70 per cent of the share's value.
But analysts said investors needed more capital to buffer increased margin calls at larger amounts.
Others say any improvement in the market is out of the chairman's hands, and subject to solid developments in the political process.
"One of the big problems is the lack of visibility from a political level. We are still in the first revolution process, and it will take three or four years maybe for any real change," said Sebastien Henin, an emerging markets portfolio manager at The National Investor in Abu Dhabi.
"As long as we have this lack of visibility it will be difficult to encourage foreigners and GCC investors to come back to the market," he said.
Parliamentary elections have now been slated for late November, while no date has been set for presidential elections.