By: Heba El Kordy

Cairo – Mubasher: Egypt’s Financial Regulatory Authority (FRA) has decided to apply the short-selling mechanism on Tuesday in a bid to lure more investments to the Egyptian market.

Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed, to be bought back at a lower price to make a profit. The profit equals the difference between the sale price and the purchase price, minus the interest incurred for borrowing the security.

In the beginning, the introduction of short selling will have a negative impact on the Egyptian Exchange (EGX), head of the business development at Pioneers Securities Mohamed Gab Allah told Mubasher. However, the new mechanism will have a positive effect on the EGX later, he added.

As an emerging market, the Egyptian market is not ready for the short selling mechanism, branch manager at Mubasher Financial Services (MFS) Safwat Abdel Naeem noted, adding that the application of this mechanism would require the EGX’s liquidity to stand at EGP 3 billion, at least, every session.

The Egyptian Exchange (EGX) closed Tuesday’s trading session on a mixed note. The benchmark EGX30 index changed its early upward trend and shed 59.5 points, or 0.4%, finishing the session at 14,886 points.

Translated by: Muhammad Khalid