Archive for the 'Egypt' Category

Work starts on African exchanges linkage project

Africa’s stock exchanges, regulators, central banks, stockbrokers and clearing systems are working together on the African Exchanges Linkage Project (AELP), set to create trading and information links between the 7 leading securities exchanges.

Participating exchanges at the first capital markets stakeholders’ roundtable were the West African regional exchange Bourse Regionale Valeures Mobilieres (BRVM), Casablanca Stock Exchange, The Egyptian Exchange, Johannesburg Stock Exchange, Nairobi Securities Exchange, The Nigerian Stock Exchange and the Stock Exchange of Mauritius.

The linkage project is a joint initiative by African Development Bank and African Securities Exchanges Association. It aims to facilitate cross-border trading and settlement of securities, unlock pan-African investment flows, promote innovations and diverse investments, and address lack of depth and liquidity in Africa’s financial markets. For more background, see our recent article.

The project is backed by $980,000 grant through the African Development Bank Korea-Africa Economic Cooperation Trust Fund (KOAFEC).

Karim Hajji, ASEA President and chief executive of the Casablanca Stock Exchange, said according to the press release: “Regional integration is a high-priority continental agenda. By organically linking 7 exchanges in Africa which collectively have a market capitalization of over US$1.4 trillion, the AELP will stimulate intra-African flows and provide opportunities for investors and trading participants in over fourteen African countries.

“With the expected outcome of boosting liquidity in African capital markets, the AELP will unlock the powerful potential of African markets to access and redistribute domestic capital for economic development.”

Pierre Guislain, African Development Bank’s Vice-President, Private Sector, Infrastructure and Industrialization, said: “The partnership between us and ASEA complements the Bank’s interventions towards deep and resilient capital markets in Africa. The African Exchanges Linkage Project will contribute to a wider financing pool for African corporates and SMEs and help close Africa’s infrastructure deficit, estimated at US$67–107 billion annually. Indeed, the continent needs deep, liquid and linked capital markets that will enable accelerated mobilization of domestic resources and incentivize private financing of infrastructure”.

Participating partners at the workshop on 24 April at African Development Bank’s headquarters included:
• Regulators Le Conseil Régional de l’Epargne Publique et des Marchés Financiers, Autorité Marocaine du Marché des Capitaux, Securities and Exchanges Commission of Nigeria, and the Capital Markets Authority of Kenya.
• Central bank – Banque Centrale des Etats de l’Afrique de l’Ouest,
• Stockbrokers and exchanges associations – Association Professionnelle des Sociétés de Bourse, Association of Stockbroking Houses of Nigeria, Kenya Association of Stockbrokers and Investment Bankers
• Clearing systems – Association Professionnelle des Banques Teneurs de Compte Conservateurs, Maroclear, Central Securities Clearing System – Nigeria, Central Depository and Settlement Corporation Ltd. – Kenya
• Investment banking – Afrinvest West Africa.

Pierre Guislain of African Development Bank and Karim Hajji of African Securities Exchanges Association and Casablanca Stock Exchange

IPO report 2 – African companies raised $2.2bn in 2018

Africa-focused companies raised $2.17 billion via 18 share offers (IPO) and listings in 2018, but the number is down 25% from $2.89bn raised in 2017 with 26 share offers and listings. According to asset manager Enko Capital, the slowdown was driven by “unfavourable market conditions”.

The Egyptian Exchange had 4 IPOs in 2018, and Ghana, Morocco and South Africa had 2 IPOs each and Botswana and Uganda one each. Six Africa-focused companies also offer shares through IPO on foreign exchanges in London and Australia. The offers included 2 IPOs linked to exits by private equity firms, continuing a trend to develop this as an exit route for private equity growth investors in African enterprises.

Enko Capital adds that the African exchanges enjoyed another 16 new listings in 2018, of which 7 were listing by introduction (down from 8 in 2017), 6 were cross listings (5 in 2017) and 3 were spin-offs as a company separated a part (4 in 2017).

The total number of listings for Africa-focused firms was 34 in 2018 (43 in 2017).

Botswana’s December bank listing

On 13 December 2018, African Banking Corporation of Botswana Limited (BankABC) successfully listed on the Botswana Stock Exchange following an IPO which raised BWP361.05 million ($33.90m). It is Botswana’s fifth largest bank in Botswana by assets and has over 60,000 customers and 330 employees. The IPO featured 180,525,000 shares or 24.9% of its share capital at BWP2.00 each.

Bank ABC is a subsidiary of Atlas Mara through ABC Holdings Limited, also incorporated in Botswana, which is the parent company of a number of sub-Saharan Africa banks operating under the BancABC brand in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe and a group services office in South Africa. The group was formed through mergers and acquisitions and offers personal, business and corporate banking as well as asset management, stockbroking and treasury services.

Egyptian education provider listed Sept

The Egyptian listings included an IPO of some 14.5m shares of Egypt’s Cairo for Investment and Real Estate Development company (CIRA) which was 18.9 times oversubscribed in September 2018. There was also a private offer for 192.5m shares which was 10.6 times oversubscribed, according to this story from African Markets website. The total offer was 207m shares at EGP6.00 each for a total of EGP1.2bn ($70.7m). CIRA is a private education provider in Egypt, targeting both the K-12 and the higher-education segments in six governorates, the main selling shareholder was the Social Impact Capital Ltd, according to Egypt Today.

Africa’s eurobond outlook 2019

A good overview of Africa’s  $92bn eurobond market, with a summary of 2018 and 5 key themes for 2019, written by Gregory Smith, Director and Fixed Income Strategist for Emerging Markets at Renaissance Capital, is available on LinkedIn.

Overall there are 20 African eurobond issuers with the largest issuers South Africa, Egypt and Nigeria, also Africa’s 3 largest economies.

About 2018, he wrote: “Despite the tough markets 2018 was a record year for African sovereign issuance and saw a growing preference for euro-denominated eurobonds, and longer maturity eurobonds. The $25.8 billion issued by African countries in 2018 makes up 28% of the current stock of African eurobonds. Angola, Egypt, Ghana, Ivory Coast, Kenya, Nigeria, Senegal and South Africa each issued 30-year paper.”

Source: Renaissance Capital

As highlighted previously, there were 2 upgrades in credit ratings for Eurobond issuers during 2018. S&P upgraded Ghana and Republic of Congo. However, Moody’s downgraded 5 countries: Angola, Kenya, Gabon, Tunisia and S&P and Fitch joined in downgrading Zambia.

Key trends Smith focuses on for 2019:

  1. International market turbulence is the top trend. It will be good news for many African countries if the US dollar gets weaker internationally and the US Federal Reserve holds back from raising US interest rates as much as previously anticipated. But there are global downside risks to issuers, including lower global growth impacted by strained US-China relations.
  2. Will key issuers make enough progress with economic reforms? Reforms such as lower deficits and adequate foreign exchange reserves are needed to support economic growth and make the debt sustainable. If markets get tough in 2019 (see previous), reforming economies do best. Check Smith’s list of 10 African Eurobond issuers busy with reform programmes under guidance of the International Monetary Fund (IMF) and the 2 issuers, Zambia and Republic of Congo, still talking but not ready to start IMF programmes.
  3. Policymakers’ skills at managing their debt, particularly as a period of heavy bond repayments begins in 2022 and remains high until 2025. Strong debt management skills include “economic policy coordination, an understanding of debt risks, a debt strategy, good data management, regular public reporting, good investor communication, a skilled team that can negotiate good terms with potential global lenders” as well as redeeming some debt ahead of maturity by longer term issues
  4. Elections in eurobond issuers this year (in approximate date order): Nigeria, Senegal, South Africa, Mozambique, Tunisia and Namibia.
  5. This year is unlikely to see as many eurobonds issued as last year. “Those most likely to issue in 2019 include Egypt, Angola, Ghana, and Kenya”.

For deeper analysis and more details and charts, see the original posting on LinkedIn here.

 NB Gregory Smith points out his views are for information, they do not constitute investment advice.

Some African IPOs – August 2018

Uganda – CIPLA-Quality Chemicals IPO closes 24 August
CIPLA-Quality Chemicals Ltd opened its initial public offer (IPO) on 13 August and will close on 24 August, aiming to list on the Uganda Securities Exchange on 24 September. The pharmaceutical company aims to raise $45 million through offering a 18% stake via 657,179,319 shares at UGX256.50 per share, according to Reuters. The company manufactures drugs that include anti-retroviral, anti-malarial and Hepatitis B medicines and its products are sold in Cameroon, Comoros, Kenya, Namibia, Tanzania, Uganda and Zambia.
India’s Cipla Limited, Uganda’s Quality Chemicals and the Government of Uganda set up the company as a joint venture in 2005, and TLG Capital and Capitalworks Investment Partners invested in the company in 2009, holding stakes worth 12.50% and 14.40% respectively. Lead transaction advisor was reported to be Renaissance Capital in Kenya and Crested Capital in Uganda is the lead sponsoring broker.
it ends a 6-year listing drought as the previous IPO in Uganda was Umeme in 2012.

CIPLA-Quality Chemicals in Kampala (file photo)

Egypt – Giza Spinning & Weaving probably Q4
The IPO of garment maker Giza Spinning & Weaving is set for the fourth quarter, probably November. According to reports, the aim is to sell a 40% stake to finance investment of EGP250m ($14m) into expanded production of garments and yarn. The company employs around 4,800 and was set up in 1979. It is the biggest garment exporter in Egypt by volume and the sixth largest by dollar value, with 87% of production exported to the USA and Europe in 2017. Beltone Financial will be the global coordinator and book runner and a roadshow will run in October, according to Bloomberg.

Uganda – MTN under pressure to list
MTN Group Ltd, which has 55% of the mobile market in Uganda with about 10.9m subscribers, is seeking to renew its 10-year licence in October. Godfrey Mutabazi, executive director of Uganda’s telecom regulator, says that selling shares on the local bourse isn’t a pre-condition for the granting of a new 10-year contract, but Uganda wants “Ugandans to be part of the company,” according to this Bloomberg report.

MTN Ghana – IPO closed 31 July
The IPO of Scancom PLC, the name of telco MTN in Ghana, closed on 31 July as par of bids for a local licence. It was selling 35% of the company, in line with discussions with the regulator. Details are to be announced soon and trading could begin from 5 September. It is set to be the largest listing on the Ghana Stock Exchange and shares could also be bought using the MoMo Wallet mobile-money platform. MTN has more than 221m customers across 22 markets in Africa and the Middle East. It had agreed with telecom regulators in Ghana and Nigeria to list its local units, and the offer was set to raise GHS3.5bn ($725m).

MTN Nigeria “not yet applied”
MTN had not yet applied for a listing by 9 July, according to a news report which quoted the Securities and Exchange Commission. Previously it had been reported that the listing could go live in August, when Reuters reported on pre-IPO documents in February 2018. It said that MTN planned to list by July and raise at least $400m to cut debt in its Nigeria unit, which was valued at $5.23bn. The Nigerian pledge to list cwas part of a settlemetn whcih also included a $1bn fine in 2016.

Airtel – London or Johannesburg in 2019
Airtel is reported to be aiming to raise up to $1.5bn by listing 25% of the equity in its Africa unit in early 2019, according to this report on Bloomberg, as part of plans to reduce its debt by $4.6bn over three years. Airtel is India’s top wireless operator. It also was reported to be planning to sell part of its stake in a $14.6bn company owning tower infrastructure, formed when Bharti Infratel Ltd merges with Indus Towers Ltd. It is owned by billionaire Sunil Mittal and is hoping to keep its Moody’s credit rating at Baa3. It sold about 8,300 towers in 7 African countries for some $1.7bn in 2015 and in 2016 sold its towers in Tanzania for $179m and sold its Burkina Faso and Sierra Leone units for some $1bn the same year. In 2010 it paid an enterprise valuation of $10.7bn for the African assets of Kuwait Mobile Telecommunications Co, also known as Zain.

Kenya – National Oil Corporation aims at Nairobi and London in 2019
The Government of Kenya plans to raise up to KES103bn ($1bn from a dual listing of shares in state-owned National Oil Corporation in Nairobi and London, according to this news report in Business Daily. NOC needs the money to exercise its rights to buy back shares before production at the Turkana oil field, discovered in 2012.
Petroleum principal secretary Andrew Kamau told the Business Daily that the contract for the concession of oil blocks in the Turkana oil fields to existing operators has a clause allowing the government to exercise a back-in right, which essentially means buying back a percentage of the ownership before production kicks in. “When you sign a contract you have a right to buy back some share, before production. The percentage we can buy back is 15 in one block and 20 in the other. The listing should raise enough money for the purchase,” said Mr Kamau, without indicating whether the State would exercise its rights for the entire stake under the clause. The two blocks are owned by British firm Tullow (50%), Africa Oil (25% and Total (25%). The Government and Tullow was to start small scale crude production of about 2,000 barrels a day in 2018, with full production due from 2021 after building a $2.1bn pipeline to Lamu on the coast, according to Reuters.

London – Intercement delays to 2019
Intercement is to delay its $1.8 billion IPO on the London Stock Exchange from the second half of 2018 to early 2019, according to reports. It makes cement and related products in Brazil, Portugal, Argentina, Mozambique, Cape Verde, Paraguay, South Africa and Egypt and was founded in 2008.

For fuller analysis of recent and upcoming IPOs across Africa, see the website of the Enko Africa Private Equity Fund, a $63.4m fund focused on pre-IPO opportunities across Africa.

Egypt is Africa’s new #1 investment destination

The challenge for African economies is to adapt to commodity slowdown and sluggish production growth. Many countries have suffered stress in the past three years, and the latest report from a leading investment bank suggests the new winners – and who is lagging. Rand Merchant Bank’s (RMB) Where to Invest in Africa 2018 report shows changes in the top investment destinations in Africa.

South Africa is off the top spot, edged aside by Egypt, and Nigeria and Algeria have crashed out of the top 10. The theme is “money talks” and focuses on major sources of dollar revenues, important income-generators and investment opportunities.

But the report compares 191 global jurisdictions and measures African against country groupings. African countries are still at the lower end of the global-performance spectrum, which is still dominated by the US, UK, Australia and Germany.

In Africa, according to the RMB press release, there is a new pharaoh in town: “Egypt (#1) displaced South Africa (#2) largely because of its superior economic activity score and sluggish growth rates in South Africa, which have deteriorated markedly over the past seven years. South Africa also faces mounting concerns over issues of institutional strength and governance though in South Africa’s favour are its currency, equity and capital markets which are still a cut above the rest, with many other African nations facing liquidity constraints.

“Morocco (#3) retained its third position for a third consecutive year having benefitted from a greatly enhanced operating environment since the Arab Spring which began in 2010. Surprisingly, Ethiopia (#4), a country dogged by socio-political instability, displaced Ghana (#5) to take fourth spot mostly because of its rapid economic growth, having brushed past Kenya as the largest economy in East Africa. Ghana’s slide to fifth position was mostly due to perceptions of worsening corruption and weaker economic freedom.

“Kenya (#6) holds firm in the top 10 at number six. Despite being surpassed by Ethiopia, investors are still attracted by Kenya’s diverse economic structure, pro-market policies and brisk consumer spending growth. A host of business-friendly reforms aimed at rooting out corruption and steady economic growth helped Tanzania (#7) climb by two places to number seven. Rwanda (#8) re-entered the top 10 having spent two years on the periphery, helped by being one of the fastest reforming economies in the world, high real growth rates and its continuing attempt to diversify its economy.

“At number nine, Tunisia (#9) has made great strides in advancing political transition while an improved business climate has been achieved by structural reforms, greater security and social stability. Cote d’Ivoire (#10) slipped two places to take up the tenth position. Although its business environment scoring is still relatively low, its government has made significant strides in inviting investment into the country leading to a strong increase in foreign direct investment over the years resulting in one of the fastest growing economies in Africa.

“For the first time, Nigeria (#13) does not feature in the top 10, with its short-term investment appeal having been eroded by recessionary conditions. Uganda is steadily closing in on the top 10 though market activity is likely to remain subdued after a tumultuous 2016 marred by election-related uncertainty, a debilitating drought and high commercial lending rates.

“Though Botswana, Mauritius and Namibia are widely rated as investment grade economies, they do not feature in the top 10 mostly because of the relatively small sizes of their markets – market size has been a key consideration in the report’s methodology.”

RMB Africa analysts spoke on economic trends:

Neville Mandimika: “The last three years have sounded an alarm, amplifying what is now a dire need for the economies of Africa to shift their focus from traditional sources of income to other viable alternatives.”

Celeste Fauconnier: “Over the past three years, some African governments have had to implement deep and painful budget cuts, announce multiple currency devaluations and adopt hawkish monetary policy stances – all as a result of a significant drop in traditional revenues.”

Nema Ramkhelawan-Bhana: “Some countries have been more nimble and effective than others in managing shortfalls,” says and an author of the report. “But major policy dilemmas have ensued, forcing governments to balance economically prudent solutions with what is politically palatable.”

Where to Invest in Africa 2018 also includes 191 jurisdictions around the world, and measures Africa’s performance relative to other country groupings. The report is available via: www.rmb.co.za/globalmarkets/where-to-invest-in-africa-2018-edition.

Africa IPO round-up

A roundup of some recent initial public offers (IPOs) of shares on Africa’s stock exchanges to raise capital

In early October, MTN launched plans to sell up to 35% of shares on the Ghana Stock Exchange. Ghana’s Securities and Exchange Commission Director General Adu Anane Antwi confirmed they had started the listing process and were working on the prospectus but no timeline had been given. According to local reports, MTN received its 15-year 4G licence in 2015 after spending $67.5m and on condition that it lists. It hopes to raise up to $500m.
MTN Nigeria is also working on plans for an initial public offer (IPO) of shares on the Nigerian Stock Exchange in 2017 which could raise up to $1bn. Nigeria is among several African governments encouraging telcos to list on local bourses and listing is among conditions to settle a record NGN330bn ($1.1bn) fine for failing to disconnect 5.1m unregistered subscribers. Nigeria contributes a third of sales and profit for the Africa’s biggest phone company, which is listed in Johannesburg with market capitalization of ZAR212.8bn ($15.3bn) in early October.
Listings and capital-raising momentum has been maintained on the Nairobi Securities Exchange. Deacons Kenya is the first listed fashion retailer, after joining the Alternative Investment Market Segment (AIMS) of the NSE on 2 August. CEO Muchiri Wahome said the extra funds were to fund expansion into towns with “a vibrant middle class” across Kenya, spurred Kenya’s rapid and ambitious devolution and setting up 47 counties under its 2010 Constitution. Deacons is also eyeing opportunities in neighbouring Rwanda and Uganda. It will also help existing shareholders who want to sell. The retailer listed about 123m shares at an opening price of KES15 ($0.15) each, but by early October the price had slumped to KES8.55.

 

Nairobi centre (credit www.kenya-advisor.com)

Nairobi centre (credit www.kenya-advisor.com)

In June, leather and shoe retailer Nairobi Business Ventures, which operates the brand KShoe, had become the fifth listing on the NSE’s Growth and Enterprise Market Segment aimed at smaller businesses. It was listed through introduction and valued at KES118m ($1.2m). Previous 2016 share issues included Longhorn Publishers in May. In June power generator Kengen succeeded in the Kenyan bourse’s largest rights issue, raising KES26.4bn ($262.1m) by offering 4.4bn new shares at KES6.55 each, with a 92% subscription rate. Kengen has projects to generate another 700MW of power, of which 605MW is geothermal.
However, Fusion Capital had to cancel its IPO despite extending twice after only getting 38% uptake and four investors for its KES2.3bn offering and failing to meet the minimum threshold.
The Johannesburg Stock Exchange had its second private equity listing. Universal Partners raised R1.3bn ($93.7m) in an IPO which was only open for 4-5 August and started trading on the Alt-X market on 11 August. The company was registered in Mauritius in April and also listed on the Stock Exchange of Mauritius. Its mandate is to invest in properties across Europe, at £10m-£30m ($12m-$37m) each and it aims to start investing within six months. The IPO was for 72m shares at R18.07 each. Several companies aiming to raise capital for African and international investments have dual-listing on the Mauritius and Johannesburg exchanges.
Liberty Holdings is likely to follow up its Kenyan IPO success with a South African Real Estate Investment Trust (REIT) called Liberty Two Degrees in December. This will include some ZAR6bn of its existing portfolio, including iconic malls around Gauteng, and ZAR4bn of new money. As in Kenya, the property investments are managed by Stanlib.
West Africa’s integrated regional stock exchange, Bourse Regionale des Valeurs Mobilieres (BRVM), based in Abidjan, Côte d’Ivoire, plans to build a platform for listing mining shares and raising capital locally. The exchange is talking with Canada’s Toronto Stock Exchange (TMX Group), a favourite bourse for early-stage mining entrepreneurs. BRVM General Manager Edoh Kossi Amenounve says it could open by 2018 and will be for companies exploring or operating mines in the region. There is likely to be a waiver to the usual requirement for 2 years of trading history. The BRVM links eight West African countries, including gold exporters Mali, Burkina Faso and Côte d’Ivoire, and fourth-largest uranium producer, Niger.
Egypt’s Minister of Investment Dalia Korshid says the Government aims to raise up to $10bn over the next three to five years with IPOs of government-owned companies in the oil sector but will start with restructuring state-owned electricity companies.

Nigerian and African economies.. after the rebasing

Charts circulated by Reuters today (28 Aug) show the rebased Nigerian economy as much bigger than sluggish South Africa, and followed by Egypt, Algeria, Angola and Morocco. They also show Africa’s fastest-growing large economies over 2010-13, with oil-fuelled Ghana leading the pack with historic growth of 10.2% a year, followed by non-commodity driven Ethiopia (9.0%), Zambia (6.7%) and the rebased Nigeria at 6.4% a year.

chart circulated by Reuters

chart circulated by Reuters

Nigeria’s economic rebasing came in April, after they updated the sectors and weights of different parts of the economy. Countries are supposed to do it every 3 years, Nigeria last did it in 1990. This was The Economist’s comment in April: “The GDP revision is not mere trickery. It provides a truer picture of Nigeria’s size by giving due weight to the bits of the economy, such as telecoms, banking and the Nollywood film industry, that have been growing fast in recent years. Other countries perform similar statistical magic – Ghana, for example, added 60% to its economy in 2010.
“Its economy has been growing at an average rate of around 7% a year over the past decade. It is rich in resources, especially oil. It has energetic entrepreneurs and aspirations to be the tech hub of Africa, boasting startups such as Konga and Jumia, budding Nigerian Alibabas. In other industries it has giants such as Dangote Cement (see article), which plans to list in London—as a big oil firm, Seplat, did this week—and is likely to become part of the portfolio of many pension funds. Growing numbers of foreigners wanting to invest in Africa’s rise will buy Nigerian stocks; after Johannesburg, Lagos has the biggest, most liquid market in the region. Above all, Nigeria has lots of people: more than 170m of them”.
Most commentators at the time pointed out that the GDP revision did not mean more food in anyone’s mouth in Nigeria and numbers of unemployed are very high and the number of people in poverty has increased, despite the high annual growth rate. GDP per head is only $2,700 after the rebasing, South Africa’s is nearly 3 times as much. Nigeria’s infrastructure is extremely poor, including transport and power. They point to lack of development and the spiraling political uncertainty and The Economist added: “To absorb the millions of young people pouring into the labour market, Nigeria requires the sustained double-digit growth that China has shown to be possible.”
However, the clearest lesson, according to The Economist: “.. is for sluggish, complacent South Africa, which has long taken its status as the continent’s giant for granted. With Nelson Mandela dead, it looks ever less like a rainbow nation. The ruling African National Congress is tainted by corruption: President Jacob Zuma is trying to explain how the state spent $24m on his private home. Without economic and political reform, it will slip further behind.”
The figures in the chart come from the International Monetary Fund (IMF), Nigerian National Bureau of Statistics and analysis by McKinsey Global Institute.

EFG Hermes says 3 IPOs coming to Egyptian Exchange this year

pic: Tom Minney

pic: Tom Minney


Three new initial public offer (IPO) share flotations with a total value of over $300 million are planned for the Egyptian Exchange (EGX) this year, says Egypt’s largest investment bank. According to a story on Reuters, these would be the first listings on the Cairo bourse since the revolution, the last IPO was in 2010.
The Egyptian Exchange has been booming in recent months, after suffering in the political turmoil since Mubarak’s fall in 2011.
Reuters reports that Karim Awad, co-CEO of EFG Hermes, told financial newspaper Al-Mal that Egypt’s Arabian Cement Company would be one of the listings but did not name the other two. Awad told Reuters by email: “The IPOs will hopefully happen this year. The exact timing in the year will be agreed with the companies who are undertaking the IPOs and considering the state of the financial markets.”
Egyptian stock market investors have chosen to ignore increasing violence and repression and are focusing instead on the ongoing national economic and political stabilization, particularly since the 14 Jan referendum approving a new constitution and cleared the way for presidential and parliamentary elections. The main EGX 30 Price Return index of the Egyptian stock exchange is up over 45% since the army ousted Islamist President Mohamed Mursi in July 2013, after mass protests against his rule.
As reported here, Egypt’s financial regulator the Egyptian Financial Supervisory Authority (EFSA) will implement new regulations for companies listed on the bourse from tomorrow (1 Feb), which could help boost liquidity and attract listings and further investment.
On 28 Jan, Finance Minister Ahmed Galal said details of its second stimulus package since Mursi’s ousting would be announced within days. The aim is to boost growth and investment, which had slowed dramatically. Government had done a first stimulus package of EGP30 billion ($4.3bn) last year and promised a second of the same size this month. Gulf countries have pledged more than $12bn in aid since Mursi was overthrown and Galal has said that EGP20bn would go on public investment and the rest would create a new public-sector minimum wage.
Before the 2011 revolution, Egypt was attracting around $8bn a year of foreign direct investment (FDI) but that shrank to $4bn in the year to June 2012 and $3bn to June 2013. Investment Minister Osama Saleh said this week they expect to beat the target of $4bn in FDI by June 2014.
Here is last week’s Economist article on Egypt.

Bond trading coming to Egyptian Exchange, listing regulations eased

A bond-trading platform could be launched in Egypt in Q2 of 2014, after 10 years of planning, according to a story on Reuters, quoting Mohamed Omran, chairman of the Egyptian Exchange (EGX): “We hope to activate the bonds market in the second quarter of this year. The file is now with the central bank to come to an agreement with banks on how to issue certain percentages of the bonds for trading,” Omran told Reuters.

The regulator (Egyptian Financial Supervisory Authority EFSA) is to relax regulations from 1 Feb so that a listed company will no longer need EFSA permission to split shares or need to call a general meeting before a capital increase, provided it complies with pre-set rules. Reuters cited a telephone interview with EFSA head Sherif Samy. He said the new regulations would also make it easier for companies who wish to list. The draft that amends listing and delisting regulations has been shared with capital markets institutions in Egypt last week and can be obtained (in Arabic) via this link.

Omran told the agency the new regulations would help boost trading on the African securities exchange and attract more investment. According to an earlier Reuters story, the new regulations will also include developing mechanisms for exchange-traded funds (ETFs). The aim is to attract new companies and boost turnover. Samy had told Reuters in October that listing regulations were in “dire need” of change.

A few treasury (government) and corporate bonds are listed for trading on the EGX but so far investors tend to hold until maturity and bond trading is slow.

The EGX also announced recently new monthly reports on important data and financial indicators of listed companies including PE ratio, turnover ratio, percentage of change in the stock price, market capitalization, average daily value of shares traded and volume (number of shares traded). According to a news release, Omran said the data and indicators would boost the quality of information, raise capacity of small dealers in making comparisons, and help investors make decisions.

Citadel Capital to issue $528m shares

Shareholders of leading investment company Citadel Capital have voted recently to allow the company, which says it has $9.5 billion in investments under control, to boost capital by EGP 3.64 billion ($528 million). According to a press release, it is part of “the firm’s transformation from the largest private equity firm in Africa into the leading investment company in the region.”
Citadel is listed CCAP.CA on the Egyptian Exchange. Shareholders voted at an extraordinary general meeting (EGM) in Cairo on 20 October. The shares will be issued at par value (EGP 5) and would boost capital from EGP 4.36 bn to EGP 8.0 bn. Shareholders will participate in the share issuance on a pro-rata basis.
Citadel Capital says it will use the capital to reach majority ownership in most of its platform companies, in particular the firm’s subsidiaries in its five core industries: energy, transportation, agrifoods, mining and cement. It plans to exit non-core investments over the coming few years as it transforms its business model to become an investment company.
Citadel Capital Chairman and Founder Ahmed Heikal said in a press release: “Approval to launch the capital increase signals clear shareholder confidence in our transformation into an investment company. The long-term holding periods permitted by the new model will allow Citadel Capital to maximize value creation through a balanced portfolio that includes a healthy mix of both assets that provide stable dividend streams and that are cash generative, and others that are in high-growth phases.”