What: The Egyptian Exchange (EGX) has announced its semi-annual rebalancing update across its benchmark indices. These periodic adjustments are based on a set of quantitative criteria that determine which companies are eligible to remain in, enter, or exit an index—based on factors like market capitalization, liquidity, and sector representation.

The latest rebalancing includes the following updates:

• EGX30 Index: 3 companies will be excluded, all of which are entering the EGX70 EWI, and 3 are taking their place.
  
  
• EGX70 EWI: Undergoes a broader reshuffle with 15 companies affected
  
  
• EGX100 EWI: Will see 12 changes, reflecting the spillover from EGX70 adjustments.
  
  
• EGX33 Shariah Index: 5 companies will be replaced, ensuring compliance with Shariah standards.
  

So What: The regular review of EGX indices plays a critical role in maintaining their relevance and reliability. These changes matter for both local and international investors, fund managers, and market analysts who benchmark against these indices.

Here are three key reasons why the EGX conducts these reviews:

1. Reflect Market Changes

Indices must evolve alongside the market to remain accurate. When regulations shift or specific sectors outperform or underperform, the composition of an index needs to reflect those changes to stay representative.

2. Adjust for Market Capitalization and Liquidity

Most indices are weighted by market cap and include only liquid companies. If a company grows or shrinks in value, or its trading activity changes, it may need to be added or removed to keep the index balanced and investable.

3. Attract Investments

Rebalancing keeps the index relevant to passive and institutional investors, many of whom allocate capital based on index membership. These changes influence what they invest in, how much they allocate, and how they adjust their portfolios.

Now What: With these changes publicly announced, the market enters a period of observation. Closely watching how investors will react and how the indices’ performance may shift in response.