The Egyptian Exchange (EGX) is widely expected to continue to continue facing difficulties in attracting foreign and Arab investors in upcoming period, not only because of its performance, but because the Gulf stock markets pose major competition over the same target investors. According to capital market managers and investment experts, Gulf markets are expected to open up to foreign investors. This is particularly in light of investors' tendency towards privatization operations, as well as the tendency to place the Saudi Arabian Oil Company's (Aramco) assets on the Saudi stock market, and other foreign markets. Further, these tendencies come in parallel with the easing of trading restrictions on foreign institutions. This coincides with other Arab stock markets such as Kuwait's move to exempt foreigners from capital gains tax, which is postponed in Egypt until May 2017. That means that Egypt is facing a challenging position in front of investors, while Gulf markets offer them incentives. Direct Investment Manager at the American Cartel Capital Ayman Abu Hend said the EGX has been facing a major challenge in maintaining its leading positing in terms of attracting foreign investors to the region over the past year. Egypt is losing its competitive edge in attracting foreign investors, to the benefit of other markets in the region, whereby Gulf markets have begun to partially lift restrictions on foreign investments, while Egypt has imposed new taxes on profits. President Abdel Fattah Al-Sisi approved last August the postponement of the 10% taxes on profits from the stock market from 18 May 2015 until 18 May 2017, while maintaining the dividend tax levied at 10%. Abu Hend said that despite the difficulties faced by the Gulf markets over the past year, they have allowed more flexibility for foreign investors. He highlighted in particular Saudi Arabia's decision to allow foreign institutions located outside the Gulf to directly trade on stocks. Kuwait decided to exempt foreign investors from capital gains taxes. The EGX will be in a tough spot facing other Arab stock markets in the period ahead. "Saudi Arabia seeks an upgrade to the Morgan Stanley Emerging Markets index, after Qatar and the UAE have joined," Abu Hend said. "There are also intentions to place Aramco assets on the stock market, which are expected to have the highest market value among all companies in the world." International investment banks have already begun to communicate with Saudi Arabia to learn more about the developments with Aramco's IPO, which is expected to exceed tens of billions of dollars in light of speculations that Aramco's market value has exceeded $3tr. Aramco said in a press release that it began several studies to launch an IPO for some of the company's assets, whereby the options vary between offering investors direct assets, or offering a package of its projects in different sectors, including refining and chemicals. The company has enormous oil reserves, registering about 265bn barrels, equivalent to more than 15% of the world reserves. The CEO of Global Investment House in Egypt, Ahmed Ali, predicted that the Saudi market will attract more investments compared to the Egyptian market, since the Saudi government has adopted a strategy allowing more space for the local and foreign private sector to contribute to the economy, following the decline in oil prices. He noted that offering Aramco's assets will be the first step in a series of IPOs launched by major Saudi companies as part of Saudi Arabia's privatization program aiming to attract more foreign investments. Ali said the Saudi Exchange (Tadawul) is currently characterized by low-priced stocks, with large tradings of about SR6 bililon every day, which encourages foreign investors to move their funds there, stimulated by the easing trade restrictions on foreigners. According to data from the Saudi website, Argaam, the price to book value of the Tadawul market declined 1.3 times, the lowest recorded level over the past 14 years. Price to book value is calculated by dividing the profits of the company by its book value. Ali said that stock markets of Qatar and the UAE have not yet benefited from their promotion on the Morgan Stanley index in mid-2013 due to the escalation of geopolitical tensions in the Middle East and the fall of oil prices. He said that once the Gulf recovers from the fall of oil prices, both markets will have strong position, capable of attracting indirect investments. Joining the Morgan Stanley index provides an advantage to markets in terms of attracting foreign investments. Three Arab markets are currently listed on the index, namely Egypt, Qatar and the UAE. — SG