Mutual funds investing in the Middle East are willing to increase their investments in Egypt despite the recent political protests thanks to improved economic indicators, according to a Reuters poll. The poll covering nine fund managers concluded that despite the protests taking place last month, five of the nine managers polled said they would increase their investments in Egypt while keeping their exposure in the rest of the region at current levels. The limited protests had seen individual investors rushing to divest their holdings. The EGX30 Index lost 11 per cent in the five sessions following the limited demonstrations, wiping out gains since the beginning of 2019. However, it rebounded in the following three weeks and is up almost 10 per cent in the year to date. The local currency is also gaining ground against the dollar, foreign reserves are at an all-time high, and the inflation rate is at its lowest level in years. “Undoubtedly, [Egypt is] the most interesting story in the Middle East and North Africa (MENA) region. The events in the last two weeks and the sharp market recovery is evidence that the risk-to-reward is very favourable,” said Vrajesh Bhandari, senior portfolio manager at Al-Mal Capital. The Egyptian financial authorities are keen to attract more investors by cutting the costs of stock market transactions compared to regional peers. The Egyptian Financial Regulatory Authority (FRA) has approved lowering stock exchange trading fees pending the cabinet's approval. The FRA approved cutting trading service fees to 0.005 per cent from 0.00625 per cent, clearing and settlement fees to 0.0100 per cent from 0.0125 per cent, and stock market commissions to 0.0100 per cent from 0.0120 per cent. Other regional stock exchanges have taken similar moves to reduce trading fees. The Abu Dhabi Securities Exchange reduced commissions by as much as 90 per cent in July. Ezz Steel Rebars (ESRS): The company reported a 3.3 per cent increase in sales during the second quarter of 2019, compared to the same period of last year to reach LE13.28 billion. The improvement in sales figures came on the back of a 17 per cent increase in the sales of the company's long production (including bars and wire rods). The average retail price of the company's products also rose 0.7 per cent quarter-on-quarter. The company also benefited from the government's imposing temporary anti-dumping tariffs on finished steel imports (25 per cent) and billets (15 per cent), a move that narrowed the gap between local and imported steel. However, according to local investment bank Pharos Holding, “the current tariff will only provide protection against severe price cuts going forward, but doesn't provide room for price hikes.” It added that “the impact of natural-gas price reductions and recent price cuts for long steel will be felt in the fourth quarter of the current year, which could possibly result in reporting a gross loss and reduce the gross profit.” Pharos expects the losses for the 2019 fiscal year to come in at around LE5 billion.
Heliopolis Housing Development: The state-owned company earlier this month offered a 10 per cent stake in its equity to an investor, whether a real-estate developer or a private equity firm in alliance with a developer, in return for managing the company. Eight companies including real-estate heavyweights like Emaar and SODIC have showed interest. EFG Hermes is also rumoured to be interested. According to the financial daily Al-Mal, the company has thus far only received one formal request from an alliance of a private equity firm and a real-estate developer. While a shortlist of qualified interested companies will be announced in mid-November, the sale will not take place before the end of the year, it added.
*A version of this article appears in print in the 17 October, 2019 edition of Al-Ahram Weekly.
