Egyptian, Brazilian Exchanges Sign MOU

BM&FBOVESPA, the São Paulo-based central counterparty this week announced a new Memorandum of Understanding (MoU) with the Egyptian Exchange (EGX) has been signed. Revealed in Cartagena, Colombia, at the annual meeting of the World Federation of Exchanges (WFE), the agreement will work towards a “mutual cooperation and the exchange of information across both Exchanges’ business areas”.

According to the new agreement, the two exchanges have created possibilities for a range of opportunities to be explored for the development of their respective businesses lines, products and markets as well as the opportunity to share knowledge and build on both exchanges’ strategies of international strengthening in the search of new opportunities, according to a statement released by the two at the WEF gathering.

BM&FBOVESPA headquarters in Brazil

“The Memorandum of Understanding is an important step on our path towards establishing effective cooperation between Brazil and Egypt’s capital markets and is also in line with a market that is ever more globalized,” Edemir Pinto, chief executive of BM&FBOVESPA said. “The purpose of this cooperative relationship is the development of markets in the two countries through the identification of opportunities that bring benefits to both sides”.

BM&FBOVESPA and EGX also plan to cooperate on disseminating information and market education through the exchange of programs related to capital markets, securities, and derivatives. There will also be collaboration to seek new ways to educate market participants as well as new entrants to the securities sector.

“This Memorandum of Understanding complements our strategy to cooperate more with global exchanges, way beyond our traditional markets in Africa, the Middle East and Europe. We look forward to a long and fruitful collaboration with BM&FBOVESPA for the benefit of both exchanges, and aim to list index or ETF products that would provide new investment alternatives to investors in both markets,” Dr. Mohamed Omran, executive chairman of the EGX said.

Egypt this month also announced it will begin to float its official currency, the pound. This will increase the likelihood it secures a loan (~$12 bln) from the International Monetary Fund (IMF). Egyptian officials also raised rates by 300bp. The Egyptian pound (EGP) is expected to eventually converge with the street price near EGP18.00, though the indicative pricing put the one-year forwards near EGP17.00.

“We welcome the Central Bank of Egypt‘s decision to liberalize the foreign exchange system and adopt a flexible exchange rate regime. Under the new system, the exchange rate will be one where people are prepared to sell foreign exchange as well as to buy it,” IMF Mission Chief for Egypt Chris Jarvis said.

“This will make more foreign exchange available. The flexible exchange rate regime, where the exchange rate is determined by market forces, will improve Egypt’s external competitiveness, support exports and tourism and attract foreign investment.”

Photo Credit: BM&FBOVESPA