EFG Hermes picks Egypt as top market in MENA

CAIRO – 28 November 2017: Egypt achieved the strongest earnings growth in the Middle East and North Africa (MENA) region, with this trend to continue on non-banking earnings, EFG Hermes said Tuesday.

In a report published by asset management, investment banking, private equity and research firm EFG Hermes, the company said that the market strength in Egypt is supported by reforms such as falling interest rates, appreciation of the Egyptian pound value, wages recovery and the rebound in tourism and natural gas levels.

Egypt’s market can offer large potential ahead as market capitalization currently stands at 17 percent of the GDP. “IPOs and privatization efforts could bring more inflows into equities and improve the float size and liquidity in the market,” the report said.

Benchmark EGX30 has delivered a total return of 22 percent in year-to-date (YTD) in U.S. dollar. “Assuming no multiple expansions we see a 20 percent in Egyptian pound total return in 2018 as highly likely bringing the EGX30 to 17,000 points by end 2018,” EFG Hermes noted.

Earnings are expected to improve in 2018 after upgrades recorded in 2017 so far, and “consensus expects 14 percent EPS growth for EGX30 in 2018 and 16 percent in 2019, almost in line with our estimates of 15 percent and 18 percent for our Egypt coverage,” the report pointed out.

Key risks for Egypt were mentioned in the report as weaker-than-expected GDP and earnings growth, high inflation rates and regional political developments.