FTSE Russell has placed the Egyptian Exchange (EGX) on its watchlist, signaling the possibility of downgrading it from a Secondary Emerging Market to a Frontier Market.
The announcement came as part of FTSE Russell’s September 2025 Country Classification Review, which cited Egypt’s failure to meet the minimum threshold of investable securities required to maintain its current status in FTSE's Emerging Market indices.
“This decision reflects ongoing issues in the availability of sufficiently liquid securities that meet index inclusion criteria,” FTSE Russell said in its statement, adding that the situation will be monitored closely over the coming review cycle.
Market analysts warn that such a reclassification could trigger capital outflows, particularly from passive foreign funds that track FTSE Russell indices and are mandated to allocate investments based on market classification.
“If Egypt is downgraded, it risks losing its appeal to a segment of foreign institutional investors who rely on index-based strategies,” said a Cairo-based investment strategist who spoke on condition of anonymity. “That could further strain liquidity and hamper capital formation.”
The decision comes at a sensitive time for Egypt’s economic policymakers, who are actively courting foreign capital as part of a broader strategy to revitalize the country’s financial sector.
Despite the warning from FTSE, data from the Egyptian Exchange tells a more nuanced story. In the first nine months of 2025, total trading value on the EGX rose by approximately 5% year-on-year, reaching EGP 826.6 billion. The increase was largely driven by domestic investors, suggesting resilience in local market participation.
Still, the uptick in activity may not be enough to offset structural issues. Key concerns include a limited pipeline of publicly listed companies, low free float ratios, and regulatory bottlenecks that deter deeper foreign participation.
In response to the growing pressure, the Egyptian government has revived its state-led IPO program, aiming to float a number of public enterprises by mid-2026. Authorities are also exploring the introduction of new financial instruments and regulatory reforms designed to deepen market liquidity and improve transparency.
According to officials familiar with the matter, negotiations are underway with several Gulf-based sovereign wealth funds to secure anchor investments in strategic sectors such as energy, logistics, and banking.
“These reforms are essential not only for the sustainability of the EGX but also for broader macroeconomic stability,” said Maha El-Sayed, an economist at the Regional Institute for Capital Markets.
FTSE Russell’s next classification review is scheduled for March 2026, giving Egyptian regulators a narrow window to implement meaningful changes.
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