MSCI has announced that, starting from the May 2024 Index Review, the special treatment previously applied to the MSCI Egypt Indexes, as announced on 8 May 2023, will be discontinued. This decision comes after considering market participant feedback, which indicates enhanced liquidity in the Egyptian foreign exchange markets and improved conditions for foreign investors to repatriate capital from the Egyptian equity markets.

Key changes in the May 2024 index review:

• Implementation of Postponed Changes: All index review changes, including updates to the Number of Shares (NOS) and Foreign Inclusion Factors (FIF), which were deferred due to the special treatment, will now be implemented. This will affect securities classified in Egypt and Kenya within the MSCI Egypt Indexes and MSCI Kenya Indexes, as well as in composite indexes that include Egypt or Kenya.
• Resumption of Corporate Events: Regular processing of corporate events within these indexes will resume, effective from 3 June 2024.

Anticipated Adjustments Post-Special Treatment Removal: In our March memo titled “Post EGP Floatation,” we predicted that the removal of special treatment would lead to three notable changes in the MSCI Egypt Index, likely during the August review. However, following this recent announcement, we now expect these changes to be confirmed in the May 2024 QCIR.

1. CIB Foreign Inclusion Factor Update:
   • The FIF for CIB is anticipated to be adjusted to reflect the ADQ deal, decreasing from 85% to 70%.
   • This adjustment is expected to result in estimated outflows of $58m, equivalent to 4.5 times the Average Daily Volume Traded (ADVT).
2. TMG Holding (TMGH EY) Upgrade:
   • Despite a 24% decline over the past two months, TMG Holding has still managed a remarkable 140% Year-To-Date (YTD) surge.
   • TMG Holding is expected to be promoted from the small-cap index to the standard index, replacing EFG Holding (HRHO EY).
   • This upgrade could lead to minimum estimated inflows of USD 77 million for TMG (7.5 times ADVT), with the potential for higher inflows if a price rally occurs before 31 May.
3. EFG Holding (HRHO EY) Downgrade:
   • Following TMG’s upgrade, EFG Holding is projected to be demoted from the standard index to the small-cap index.
   • This is due to MSCI’s continuity rule for Egypt, which allows only three names in the standard index.
   • EFG Holding could face net passive outflows of $22m (4.5 times ADVT).

Upcoming QCIR Announcement:

• MSCI is scheduled to release the results for May’s QCIR on 14 May, with the changes taking effect at the close of business (COB) on 31 May.