G Hermes Holding, the leading financial institution with a universal bank in Egypt and the leading investment bank franchise in Frontier and Emerging Markets (FEM), kicked off its 17th annual One-on-One Conference yesterday in Dubai, which will run up until March 9 2023. Attendees include 561 global institutional investors and 179 companies drawn from 29 countries across the region.
Highlights from the opening session included:
• Keynote Speech by EFG Hermes Holding Group Chief Executive Officer Karim Awad;
• An on-stage interview with Ayman Soliman, Chief Executive Officer of The Sovereign Fund of Egypt (TSFE);
• The largest (and only live) frontier and emerging markets research poll
Key takeaways from remarks by Awad:
Awad was thrilled to welcome over 1,000 registered guests to the 17th One-on-One Conference, noting that it has now been brought back to its usual March spot.
• EFG Hermes Holding is celebrating 40 years of success and transformation this year, with the only constant being its relentless commitment to providing clients with best-in-class services– one of which being the One-on-One Conference, Awad remarked.
• Today, the Group stands as the region’s largest broker, best research house, and a top-five investment banking franchise that closed equity, M&A and debt transactions in the UAE, Saudi Arabia, Kuwait, and Egypt in the past 12 months alone. Facing up to massive challenges after 2011, the Firm’s buy-side team has completely resurrected EFG Hermes Holding’s private equity business, building a globally respected renewable energy practice and partnering up with the region’s largest public equities asset manager in a business that runs almost USD 3 billion of AUMs.
• The Firm also added several lending products to EFG Hermes Holding’s offering, including commercial banking, Buy-Now, Pay-Later (BNPL), microfinancing, factoring and leasing, among others, which fortifies its earnings and allows it to offer exportable products to the region, Awad said.
Key takeaways from the on-stage interview with Mr. Ayman Soliman, CEO of The Sovereign Fund of Egypt:
• Having kickstarted operations before the onset of COVID-19, TSFE had to take a concerted look at what was “vital” to the Egyptian economy in terms of key sectors.
• Egypt is a “two-sided economy”: one is composed of sectors that need to be reexamined for growth, such as agriculture, tourism, services, as well as any consumer-driven sector.
• The other side features sectors Egypt can offer to the “modern world,” including digital, tech-driven solutions, renewables, and the green economy. These serve Egypt’s Vision 2030 and will play a pivotal role over the course of the next 15 years.
• In a challenging global economy, what makes the most sense for an emerging market? Food, healthcare, logistics, supply chain management, or sectors where labor arbitrage is beneficial, and Export-oriented businesses.
• TSFE’s ethos is to create avenues for capital to flow into key sectors, and it focused on agriculture, healthcare, and infrastructure to help them grow and scale. It also looked for growth opportunity in financial services, fintech and industrials.
• In terms of the fund’s pre-IPO program for the state’s privatization drive, global equity markets are challenging, said Soliman.
• Corporatization is “a mile every company has to walk” when it comes to IPO-readiness, he said.
• TSFE carefully selects companies that have the “right growth profile and management talent,” to help them grow outside Egypt or tackle their next M&A opportunities, added Soliman.
• TSFE is bringing in strategic anchor partners that add value to companies that need capitalization, so the company can go to market at multiples of its valuation — it’s a win for investors, the partner, and the company.
• For the EGP “devaluation unlocks a multitude of opportunities for investors,” said Soliman. Egypt is becoming a very affordable tourist destination and is seeing a substantial pickup in exports. Labor arbitrage is also a key opportunity in the industrial and services space.
• Egypt has seen this cycle before and overcame the circumstanceس,” With valuations being challenging globally, Egypt poses a good entry point for investors now.
• TSFE is an advocate for local institutional plays in the stock market. More recently, the government has “stepped up” and looked at insurance as well as large pension fund managers, equity managers, and the like – deepening and “reviving” the market.
• For TSFE, a key metric is an optimal mix of local and foreign partners, where today foreign participation stands at two thirds. Often, local partners come with foreign ones in tow, or it becomes the fund’s role to help forge ties between local and foreign partners.
• Local partners have great capabilities but sometimes not the capital to reach their ambitions, and that is where TSFE comes in.
KEY TAKEAWAYS from the 2023 1×1 Live Poll:
• 45% of respondents see the US Federal Reserve cutting rates in 1H24, while 27% see it happening in 2H24.
• An overwhelming 73% of respondents believe Brent crude will average USD 80/bbl in 2023 — 23% see it averaging USD 100.
• Only 34% of respondents had a ChatGPT account, with 12% unsure what the platform was in the first place – a good sign AI may not be taking over quite yet.
• The biggest source of risk for your business over the next year: Geopolitical factors took the lead at 34%, but a dead heat between cost of debt (25%) and finding good talent (24%). Technological change trailed at 16%.
• Dubai’s luxury real estate doubled in January. 36% of respondents said it would end the year 0-15% higher but 21% said it would dip by that same level. Meanwhile 20% felt it would remain unchanged and 15% believed it would surge over 15% by the end of 2023. Only 8% of respondents felt it would drop over 15% in value.
• The best investment opportunity? That would be Saudi Arabia’s Vision 2030 said 34% of respondents. AI came in second at 25%. Manufacturing shifting away from China (15%), structural change in global energy markets (14%) and Egypt’s economic reforms (12%) were largely tied for third.
• 57% of respondents said the MSCI EM Index will do better in USD terms in 2023 while 43% tipped the S&P500.
• What impact will environmental changes have on your business? 41% said it would impact business moderately while 30% said “significantly” and 29% pegged little to no impact.
• Inflation topped the list of concerns still, at 37% of respondents, while tight liquidity squeezing bank margins (31%) came in second. Tied for third? Weak global demand weighing on petrochemicals (15%) and real estate prices not reflecting economic fundamentals (17%).
The industries you’d most likely invest in for the next five years? Healthcare topped the list at 24% of respondents. IT (19%), renewables (18%), and food production (17%) pretty much tied for the second spot, while oil and gas lagged at 13%. Only 2% of respondents pegged gold mining as a prospect and 6% banks.
