Egyptian Capital Markets
Smith, Pamela Ann, The Middle East
Egypt is the favoured place for foreign investment in the Mediterranean countries of the Middle East and North Africa, according to bankers, analysts and investors who attended an international conference in London at the end of March. The conference -- "Mediterranean Capital Markets", was sponsored by the European Union in Brussels and by the London daily, the Financial Times, and was attended by some 350 participants from the Mediterranean countries, Europe and the US.
Several financial analysts suggested that the region would soon become the target for a "massive influx" of funds, partly as a result of investor disenchantment with markets in Asia. More positively, the region's relative isolation in the past from the adverse effects of globalisation and its recent economic reforms were also cited as major attractions.
"There have been enormous strides in terms of economic performance," remarked Angus Blair, Head of Research for the region at the Dutch international bank, ABN AMRO. Foreign exchange reserves were growing, budget deficits improving, inflation was low and central banks were taking a greater role in regulating markets, he added.
Blair estimated that some "$2 billion in equity flows plus new debt instruments" had been invested in the region in the past year. Markets which had been overlooked in the past three years were now being viewed with enthusiasm by investors around the world. "We remain very bullish indeed regarding the future of the Mediterranean," he told the audience.
The prospect of a combined Euro-Mediterranean stock exchange by the year 2010 situated within a European free trade zone was cited by another speaker, Dr. Cecilia Danieli, as a prime reason for investor interest in manufacturing projects. Chairman of Italy's Danieli and C. Officine Meccaniche, whose company has set up a joint venture to produce steel products in Egypt, she noted in particular Egypt's "low prices for power" which amounted to "less than one-half" the world average, and the rise of a new middle class of consumers.
"Reforms to promote privatisation and the creation of more sophisticated financial instruments, such as debt/equity swaps were another important factor in Egypt's favour," she added.
"The region's capital markets offered investors important opportunities to diversify their portfolios," observed Mohamed El-Erian, European head of emerging markets at Salomon Smith Barney. "Countries such as Egypt, Jordan, Morocco, Tunisia and Algeria could benefit from the flight to quality within the emerging market sector," he maintained.
"Bond and other issues on European markets for Lebanese banks were now averaging $150 million and were six times oversubscribed," commented Dr. Freddie Baz, Advisor to the Chairman of Lebanon's Banque Audi. "This compares with $60 million a few years ago, prior to the expansion of the Lebanese banking sector," he said.
"Current turnover on the official and parallel stock markets in Jordan has risen 42 per cent in the year ending in mid-March to more than $500 million," Dr. Michel Marto, Chairman of the Jordan Securities Commission, told the participants. "A bond market was also developing, along with trading in shares," he added.
Morocco, which was one of the first countries to privatise successfully, was now well on the road to opening up its infrastructure to private investment, other speakers noted. Tunisia -- which along with Morocco, Jordan, Israel and the Palestinian Authority, has signed an agreement to participate in the Euro-Mediterranean free zone proposed by the EU in Barcelona at the end of 1995 -- is in the processing of opening up its banks to foreign investors. This, analysts noted, would provide both finance and know-how to help prepare its manufacturing sector and service industries for greater competition.
However, the optimistic mood of the conference was tempered by questions about whether the Mediterranean countries were ready to absorb huge new flows, which are expected to come both in the form of direct investments in industrial, commercial and infrastructural projects or as "portfolio" investments placed by international and regional mutual funds and unit trusts. …