Saeed Azhar and Tom Arnold
DUBAI (Reuters) – Egypt’s EFG Hermes wants to enter Nigeria through an acquisition and expects to get regulatory approval to start a brokerage business in Kenya this year as part of a big push into frontier markets, a senior executive told Reuters on Monday.
The investment bank also plans to boost its research team to between 12 and 15 from eight over the next 12 months as interest among institutional investors grows in smaller, fast-growing economies in the Middle East, Asia and Africa, Ali Khalpey, CEO of EFG Hermes’ Frontier market unit, said in an interview.
EFG took a controlling stake in Karachi-based Invest and Finance Securities Ltd last year, which now operates as EFG Hermes Pakistan Ltd, with a staff of 60 people.
As well as Nigeria, Kenya and Pakistan, EFG is also eyeing expansion into Bangladesh and Vietnam, said Khalpey, who joined EFG from frontier-focused investment bank Exotix Africa LLP.
“We have chosen those five markets as we like the macro-environment and want to be on the ground to benefit from the growth story,” he said.
“The frontier market should be a decent part of the revenue growth of EFG Hermes’ overall business,” Khalpey added, without disclosing any revenue targets.
Once it gets the regulatory approval in Kenya, EFG hopes to have an office with 10 to 15 people to serve as a base for Tanzania, Rwanda and Uganda, he said.
“We like to look at illiquid, non-transparent markets where being on the ground gives incredible competitive advantage over everybody else,” he said.
Khalpey said he was quite excited about long-term prospects for Pakistan, where the economy has been growing at a good pace and the stock market has performed well, until a recent correction.
In May, index provider MSCI reclassified Pakistan as an emerging market from frontier market status. Economic growth is projected at 5.3 percent this fiscal year – short of the government’s 5.7 percent target but the fastest since 2007.
Despite the spate of positive news, Pakistani stocks have been hurt by political uncertainty as the country’s prime minister Nawaz Sharif faces an investigation into corruption allegations linked to the so-called Panama Papers leak. He has denied any wrongdoing.
“It is an unfair environment to judge Pakistan long term, short term there are clearly some challenges,” Khalpey said.
“We are there for the long term and we see a very long term growth trajectory for Pakistan.”
(Reporting by Saeed Azhar and Tom Arnold; Editing by Mark Potter)