Prices on Egypt's stock market must stabilise before same-day settlement resumes, the financial regulator said, shrugging off warnings from some traders that the delayed settlement imposed during February's popular uprising was deterring investors.
Until February, when President Hosni Mubarak was toppled by huge popular protests, investors were allowed to buy and sell many shares the same day (T+0) but anyone holding stocks by the end of each session then had to settle two days later (T+2).
The T+0 rule was scrapped on February 8 and other measures were imposed in a bid to calm volatile trading in the wake of the uprising. Those steps remain in place.
The benchmark index index is down 39 percent since the start of the year.
We need stability in prices to reinstate the T+0 system,
Ashraf El Sharkawy, head of the Egyptian Financial Supervisory Authority (EFSA), said in an interview as part of the Reuters Middle East Investment Summit.
He said investors and executives were nervous because of the uncertain outlook for Egypt, which starts voting on November 28 in its first parliamentary election since the uprising. The outcome is unclear and some expect a fragmented parliament.
Not all investors are trading on a daily basis. A lot of international institutions prefer the (T+2) system, Sharkawy said about the demand for a switch back to T+0.
Some traders say a return to T+0 would reduce risk perceptions as investors would be able to exit the same day. Now they must hold stocks for two days regardless of developments in a region convulsed by the Arab Spring.
A switch back to T+0 would boost liquidity, they add.
But some market observers say it is not the kind of big investment institutions that Egypt wants to attract that prefer buying and selling the same day but small traders speculating and creating extra volatility in prices.
The T+0 rule had applied to about 80 of the most liquid stocks, such as firms in the EGX30 index.