Capital Markets
From The Report: Egypt 2013
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Since the start of the nation’s political transition in 2011, Egypt’s capital markets have faced a number of challenges. Nevertheless, 2012 saw Egypt’s exchange recover the ground it lost in 2011, growing by 51% year-on-year to become one of the fastest expanding in the world. Its path to recovery has been a volatile one, which has demonstrated the influence of political events on market sentiment, but just as importantly, the return to form displayed the bourse’s ability to attract capital when circumstances allow. In 2009 the Cairo and Alexandria Stock Exchange was rebranded as the Egyptian Exchange (EGX). As of June 2012, 212 companies were listed on the exchange, with a nominal capital of LE150.1bn ($21.4bn) and market value capital of LE339.8bn ($48.4bn). Egypt’s ongoing political transition is the single biggest factor affecting the bourse’s performance, and until the prevailing unsettled economic backdrop has stabilised, it is unlikely that the EGX will show the type of sustained growth that its management and regulator have been working assiduously to engender.

This chapter contains interviews with Mohamed Omran, Former Chairman, Egyptian Exchange (EGX); and a viewpoint from Hussein Choucri, Chairman and MD, HC Securities & Investments.

Articles from this Chapter

Overview

Path to recovery: Long-term market strategies will be key during a time of political transition
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Since the start of the nation’s difficult political transition in 2011, Egypt’s capital markets have faced a number of challenges. An economy that was growing at a rate of 7% has given way to a more modest GDP expansion of 2.2% in the 2011/12 fiscal year, while foreign direct investment fell from a net of LE6.76bn ($971.96m) in 2009/10 to just LE2.19bn ($311.64m) in 2010/11 and is likely to remain subdued until Egypt’s political situation has stabilised. Both of these factors have exacerbated…

Interview

OBG talks to Mohamed Omran, Former Chairman, Egyptian Exchange (EGX)
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Interview:Mohamed Omran To what extent will the reintroduction of T+0 positively impact on short-term activity on the EGX? MOHAMED OMRAN: We are expecting this to have an impact on value trading in the exchange. This change will allow traders to sell all or part of the issue on the same day of the purchase and vice versa. Before the introduction of T+0, we functioned under T+2 meaning a trade took two days to settle before it could be re-traded. The impact of T+0 is that it could contribute…

Analysis

New regulation: Reforms are bringing the stock exchange in line with international best practices
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Even amidst the broader turbulence and upheaval in Egypt, the country’s financial markets have avoided worst-case scenarios in part thanks to a robust regulatory regime and careful intervention. The creation of the Egyptian Financial Supervisory Authority (EFSA) in July 2009 was widely welcomed by both the financial community in Egypt and interested parties in the international sphere. A year later, the Organisation for Economic Cooperation and Development (OECD) stated that its establishment…

Viewpoint

Hussein Choucri, Chairman and MD, HC Securities & Investments, on the path forward for Egypt’s economy
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It was recently announced that a delegation from the IMF is set to arrive in Cairo to pursue negotiations regarding its expected loan to Egypt. A general consensus has recently emerged that the IMF is urging Egypt to implement a financial austerity programme, aimed mainly at controlling government finances and reducing the country's budget deficit. In addition, it is said that the IMF is encouraging Egypt to devalue the Egyptian pound exchange rate. There is little disagreement that Egypt…

Analysis

Investment flows: Private equity firms are playing a growing role locally and across the continent
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The Egyptian economy has provided a wealth of opportunities to private equity (PE) firms, both domestic and foreign. The heady years leading up to the 2008 global economic crisis featured a number of significant deals that raised the profile of PE and helped to establish it as an alternative source of funding for Egypt’s corporations. Particularly notable among these were the investments in health care, education and agribusiness by Dubai’s Abraaj Capital and the $1bn equity investment by…

Analysis

Amer Group: Real estate
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THE COMPANY: Amer Group Holding specialises in the development of mixed-use resort destinations under the Porto World concept, including residential units, hotels, malls and restaurants, thus providing it with multiple revenue streams. The company applies the principles of sharia law in its operations. Amer Wakf and Mansour Amer are the main shareholders, with a combined stake of 35.6%, followed by SOL Global Holding, which owns 35%, while 19% is free float. HOUSING: Since 2005, Amer Group has launched a total of 10 real estate projects under the Porto World brand with a total area of 5.8m sq metres located on Egypt’s Mediterranean and…

Analysis

Commercial International Bank: Banking
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THE COMPANY: Commercial International Bank (CIB) was established in 1975 as a joint venture between the National Bank of Egypt (51%) and Chase Manhattan Bank (49%). It is now the biggest publically traded bank in Egypt. With the sale of National Société Générale Bank, CIB offers the only exposure to a large-cap bank in the Egyptian market, and with the potential de-listing of Orascom Construction Industries, it would be the largest constituent of the EGX 30 Index. As of December 2012, the bank maintains a market share of 8%. CHANGES IN ECONOMY: The current economic stagnation is the main pullback factor for Egypt’s banking sector.…

Analysis

Eastern Company: Consumer goods
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THE COMPANY: Eastern Company (EC) is the leading tobacco manufacturer in Egypt, with an estimated market share of 81% in fiscal year 2011/12 (FY11/12). The industry caters to 31% of the population, who consume an average of 10 sticks per day. EC produces five main products: cigarettes, molasses tobacco, rolled tobacco, pipe tobacco and cigars. REVENUES: The company’s sales revenue consists mostly of local cigarettes (81% of total sales in FY11/12) in addition to under-licence cigarettes (14%). Between FY07/08 and FY11/12, EC’s total revenue rose at a compound annual growth rate (CAGR) of 6% due to revenue CAGRs of 5% for local cigarettes…

Analysis

EFG-Hermes Holding: Financial services
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THE COMPANY: Egyptian Financial Group (EFG) was established in 1984 as a consulting boutique. It merged with Hermes Financial in 1996 to form EFG-Hermes Holding. In 2007, the company acquired a stake in Bank Audi, a Lebanese commercial bank, to smooth income fluctuations by developing an integrated banking model. The firm sold its stake in Bank Audi in 2009 as it could not buy a majority stake and instead acquired 63.7% of commercial bank Credit Libanais (CL) in 2010. EFGHermes currently operates over 65 subsidiaries in Egypt, the UAE, Saudi Arabia, Oman, Kuwait, Jordan and Lebanon. Its investment activities include brokerage, asset management,…

Analysis

El Sewedy Electric Company: Energy
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THE COMPANY: El Sewedy Electric Company is a fully integrated energy-solutions provider, manufacturing and selling integrated energy products and services in seven energy segments. The company has 30 production facilities in 14 countries. It sells its products in 110 countries and caters to the infrastructure, industrial, commercial, and residential markets. El Sewedy Electric consolidates itself into three lines of business: • Wires and cables, with a total annual capacity of 266,200 tonnes, is the company’s main pillar, contributing about 57% of the group’s gross profit; • Electric products, which covers metres (4.75m-unit…

Analysis

MNHD: Real estate
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THE COMPANY: Madinet Nasr for Housing & Development (MNHD) was established in 1959 by governmental decree to develop present-day Nasr City. The company also operates in construction works through two subsidiaries: El Nasr Utilities, 95% owned, and Nasr Company for Civil Works, 52% owned. Over the years, MNHD evolved from a purely government-based company specialising in middle-income housing into a largely privatised real estate developer by 2006, when Beltone Financial Holding’s private equity arm acquired a 30% stake in it. Since then, MNHD has undergone managerial restructuring and resolved major land-bank-related issues that had…