Proposals are still small, we hope for return of emerging market funds this year, says Ebeid
We will manage three proposals in Egypt; industry, consumption most attractive for mergers, acquisitions, says Gad
Corporate profits grew 70% last year, Egyptian stock prices most attractive for investors, says Shams
We study opportunities in regional energy sector; Egypt our top priority, says Moussa
EFG Hermes expects 2018 to be the best year for the Egyptian economy in a long time. These expectations came due to the government’s economic reforms, in addition to solving the structural problems of the economy, the Egyptian Exchange (EGX) being one of the main beneficiaries of growth.
Daily News Egypt interviewed EFG Hermes’ senior executive management. Mohamed Ebeid, co-CEO, predicts that foreign investments targeting the Egyptian market will turn into longer-term investment instruments. This is due to the increased confidence in the Egyptian economy and the government’s commitment to the economic reform programme.
According to Ebeid, despite the growth in foreign investments during the past year after injecting $19bn into fixed-income securities and net foreign purchases of $900m on the EGX, a decline in economic risks will increase the length of investments, long-term bonds, and benefit the EGX.
He added that during the Annual Egypt Conference organised by EFG Hermes in January, more than 60% of the participants voted that they would direct their investments towards the stock market.
However, he stressed the need for new companies of larger sizes. He expressed the hope that the new year will witness between two and three government proposals.
Ebeid expects the coming period to be the most attractive for investors. He pointed out the delay in pumping investments into the EGX for about two years after the devaluation of the pound in 2003, and the investments received by the Egyptian market after that period were very large.
Last year witnessed a significant growth in the value of market transactions to reach between EGP 1bn and EGP 1.5bn a day, despite the continued high interest rates.
Ebeid said that the investments of 39 financial institutions and asset management companies, which attended the EFG conference, represent about 90% of the liquidity received by the Egyptian economy in 2017.
For his part, Mustafa Gad, co-head of the promotion sector at Hermes, said that the company is working on several proposals in all the countries in which it operates.
He expects that the Egyptian market in 2018 will have three government proposals, one of them for Banque du Caire, in addition to two for industrial companies.
Meanwhile, Mohamed Abu Basha, a macroeconomic analyst at EFG Hermes, predicted that the volume of investments would double in direct investments to the Egyptian market or the EGX this year. Foreign direct investment (FDI) would rise to $9.7bn by 2018.
The first half (H1) of this year is likely to witness the bulk of monetary easing measures by the Central Bank of Egypt (CBE) with an interest rate reduction of 2-3%. This will happen before entering the next step of cutting subsidies in July, as oil prices rise above $70 a barrel.
Ahmed Shams Eldin, head of the group’s research department, expects Egypt’s share of the emerging markets share of foreign investments to rise significantly, with the profitability of listed companies growing 70% last year.
EFG Hermes expects the Egyptian stock market’s benchmark index to rise above 17,500 points this year, and Shams said that with the first interest rate cut, valuations in the highly dysfunctional sectors would rise.
Eldin believes that the Egyptian pound is trading at 30% below its real value.
He stressed investors’ desire to go to sectors other than oil, such as health, education, and the industrial sector.
Karim Awad, CEO, added that EFG Hermes is seeking to add mortgage finance, electronic payment, and insurance activities within 12 to 24 months.
He also revealed that the company is about to obtain a factoring license and is due to commence operations during the first quarter of 2018.
He expects that the share of non-bank financing activities will grow from 10% of the group’s profit in 2017 to 50% over three years.
Karim Moussa, head of direct investment and asset management at the EGX, said EFG Hermes will utilise its international expertise in the renewable energy sector.
The sector manages the Vortex platform, one of Europe’s largest renewable energy managers, with wind power and solar energy for more than 300,000 houses in Western Europe.