Egypt is drawing in capital from the Arabian Gulf as investors liquidate positions in the region to tap into expected growth from the Arab world’s most populous nation.
Analysts say funds are moving into both private investments and publicly traded securities.
The trend follows a major investment conference in the Red Sea resort of Sharm El Sheikh attended by global business and political leaders, where more than US$12 billion in funds was pledged by the UAE, Saudi Arabia and Kuwait alone.
“Money has been going into Egypt, following all the pledges of money to help it rebuild,” said Sanyalaksna Manibhandu, senior equities analyst at the National Bank of Abu Dhabi.
“If Dubai isn’t dominant, you tend to see Egypt do well,” he said.
Aly Abou-Sabaa, the vice president of the African Development Bank, said: “We have seen overwhelming support over the past two days, funds coming through foreign direct investment but also through the private sector.”
The low oil price has dented the appeal of UAE equities, with investors looking elsewhere for returns, while the positive effect of the country's inclusion in the MSCI Emerging Markets Index has largely worn off.
"Since June 2013 Dubai and Qatar have benefited from investors pricing in the benefits of an MSCI; now they've both lost some of that support," Mr Manibhandu said.
The Abu Dhabi Securities Exchange has lost 10.2 per cent over the past 12 months, while the Dubai Financial Market has fallen by 14.3 per cent over the same period.
By contrast, Egypt’s EGX is up 17.2 per cent during the same period. For Qais Al Maskati, the managing director of First Equity Partners, a Bahraini private equity firm, now is the right time for the company to add to its $1bn of Egyptian assets. “We are going to gear up [our presence in Egypt], like many other investors in the world,” he said. “Egypt is a promising country – that’s the simplest way to put it.”
The bank plans to increase lending to Egypt this year by $500 million, he added.
First Equity Partners also yesterday finalised the purchase of a controlling stake in White House Securities, which helps small and medium enterprises to list on Egypt’s Nilex, the country’s second-largest stock exchange.
First Equity has made investments in steel manufacturing, food, and information technology, and it expects an influx of new foreign direct investment to create new opportunities in a range of sectors.
Foreign direct investment (FDI) fell off following the revolution of 2011 and then again in 2013. But Egypt’s central bank’s predictions indicate that FDI will be higher than at any time since before 2010.
“The billions pledged at the conference are a definite positive, particularly as they come not only from Gulf investors, but Europe as well,” said Maya Senussi, a senior economist at Roubini Global Economics.
One financial sector analyst said: “Our clients have a lot of interest in Egypt. Investors are looking away from the Gulf, and towards Egypt, which looks lucrative in terms of FDI, deficit reduction, and GDP acceleration.
“You want to be invested in an oil-importing country right now, not an oil-exporting nation.”
However, Mr Al Maskati warned that more needed to be done to attract investors to Egypt. “There will be a lot of flux in Egypt over the next year,” he said, because “the government is yet to put together a comprehensive legal framework to ease tensions with investors. Having said that, there are a lot of good opportunities on the ground.”
abouyamourn@thenational.ae
jeverington@thenational.ae
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