Egyptian Markets Take Off
Smith, Pamela Ann, The Middle East
Egypt's moves to liberalise its financial services sector continue apace.
Egypt's banking sector is undergoing a rapid transformation as the government enacts new financial legislation aimed at bringing the sector up to standards and prepares for another sweeping round of privatisations.
Foreign bankers are showing renewed confidence in the sector as evidence mounts that Egypt is recovering from the overspill of pessimism that hit global financial markets following the economic crises in Russia and Asia last year.
The latest series of financial reforms follows Egypt's agreement with the World Trade Organisation last January to liberalise financial services. The government's continuing commitment to the expansion of banking products and to the reorganisation of the capital markets is also adding to the optimism. "We have selected Egypt as a strategic focus for our capital market activity in the Middle East and North Africa (MENA)," Rana Ayman, Investment Banker for the region at Banque Paribas in London told The Middle East.
He described the Egyptian market as "one of the biggest and most open. The economy is relatively sound with good macro-economic indicators," he added. "They are doing the right things, and privatising as well." Barclays Bank of the UK has gone still further. Last November, after two years of negotiations, it announced that it had agreed to raise its stake in Banque du Caire Barclays International from 49 to 60 per cent, thereby obtaining majority control of the joint venture with one of Egypt's leading state-owned financial institutions. Barclays chairman, Andrew Buxton, said the move would help make Cairo Barclays regional centre for the Middle East.
Plans by the government this year to reform the existing laws and regulations on mortgages are expected to provide a boost to local bank profits, as well as addressing popular complaints that too much private investment goes into luxury housing, hotel and commercial developments rather than providing apartments families can afford. "We aim to make it profitable for the banking system to finance low-cost housing," Boutros Ghali told reporters. The legal changes would "make it easier [for the banks] to provide mortgages and easier to secure mortgages," he added.
Reforms to the country's stock markets are also attracting favourable comment by both foreign and local investment bankers, brokers and analysts. "The Stock Exchange is becoming professional," observed Waleed Haram, assistant director of research for the Middle East at ABN AMRO in London. "They've hired people who can give information, and are moving toward quarterly reporting for companies. On regulation, they've really moved forward."
Under the chairmanship of Sherif Raafat, who assumed office a year ago after working as a fund manager at US-based Concord International Investments, the Exchange has changed the way it calculates closing prices to help diminish the possibility of price manipulation, issued new rules regarding the removal of registration from dormant shares, posted new requirements for initial public offerings (IPOs) and new regulations for brokerage companies. The Exchange has also moved to ensure greater openness and disclosure of company information by listed firms.
Daily and weekly reports are now available on the Internet and an electronic database is being developed on Egyptian public companies that will be accessible around the world. …