Egyptian government needs to focus on pro-investment measures to avoid EM contagion: report
Market is expected to raise EGP 20bn from IPOs in coming months
A recent report issued by Shuaa Capital said that Egyptian government needs to focus on pro-investment measures, be it domestic or foreign investments, to avoid the impact of any emerging market (EM) contagion.
“There needs to be an implementation of the goal-based investment incentives to help deliver the government’s target in terms of investments, job creation, and financial inclusion.This would help reduce reliance on hydrocarbon-focused FDIs. Fortunately, what served Egypt well throughout the past couple of years is that the government had already taken bold steps of structural reform beforehand,” the report noted.
It all started with consecutive subsidy cuts and the EGP flotation, ending with finalising the legislative framework conducive for investment growth.That said, the Egyptian economy is seen as less vulnerable compared to other EM economies that are yet to take such measures.
Also,with inflation normalising within its target range of 13% ±3%, the Central Bank of Egypt (CBE) would eventually be focusing more on economic growth as opposed to price stability.
According to the report, the upcoming stock offerings by private-sector and state-owned companies are expected to raise over EGP20bn during the coming 3-4 months or so.
For the market to absorb such largesized offerings, there needs to be external fresh liquidity coming from global investors,the absence of which could be negative for listed stocks.
“We understand that the government is hiring regional and global investment banks to help in marketing these offerings globally for this particular reason. To attract foreign liquidity, however, we point to two prerequisites: 1.Valuation multiples these stock offerings will be sold at should imply an attractive discount to fair value. 2. EGP needs to continue to be relatively stable,” the report concluded.
Meanwhile, Pharos Fund I, an openended equity fund run by Pharos Holding Group, has gained 11 standing points on the Egyptian Investment Management Association’s weekly ranking report, according to a press release.
This advance in performance now places the Pharos Equity Fund amongst year‐to‐date the top 15 equity funds in terms of the
performance, whilst the Pharos Fund has led the monthly rankings of all funds for two consecutive months.
“Pharos Holding continuously analyses its strategies and processes to ensure solid investment decisions, and strong performance across all of its operations to improve performance.The solid improvement in performance of the Pharos Fund I in 2018,is due to the relentless efforts of the new management team within ourAsset Management division”, says Angus Blair, COO of Pharos Holding for Financial Investments.
Managing Director of Fixed Income, Pharos Asset Management,Ahmed Al Ashi, added that “our stringent new investment strategies, which we have put in place, aim to position our fund as the best performer of local equity funds, maximise investment value, whilst communicating more efficiently with our clients.”
"Transparency, a systematic and a more disciplined investment approach are at the core of our investment decisions,which is reflected today in our new ranking on EIMA,” added Al Ashi.
Pharos Asset Management provides a range of unique financial solutions through innovative investment strategies which look at the specific investment needs and requirements of clients, by applying the highest levels of scrutiny and analysis, thereby ensuring that customised investment policy design, asset allocation, portfolio construction, risk management, and investment monitoring are all offered to our growing client base.