Arqaam Capital, an investment bank based in Dubai, has bought an Egyptian brokerage as it seeks to tap into one of the Middle East's largest financial markets.
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The purchase of El Rashad Securities Brokerage is a show of faith in Egypt, which still faces an uncertain future almost a year on from the ousting of Hosni Mubarak from the presidency.
"We have a positive view on Egypt in the medium and long term," said Tarek Lotfy, the managing director of capital markets at Arqaam. "The Egyptian economy remains supported by strong fundamentals, and we are committed to investing in and building a regional brokerage platform to ensure our clients can take advantage of the country's growth and development."
Egypt's main index fell by nearly half last year, making it one of the world's worst-performing stock measures, after protests led to several shutdowns of the market. Bank lending has also been sluggish as profits in the financial sector remain under pressure.
As a result, many investors have been on the sidelines waiting for political conditions to improve.
But Arqaam believed that Egypt would recover from its political instability and that now was the right time to invest in the country, said Mr Lotfy.
Arqaam agreed with Al Rashad Holding to buy up to 100 per cent of the brokerage. Financial details were not provided.
The deal would give institutional clients and high-net-worth individuals access to the Egyptian market, Arqaam said. El Rashad's clients will gain access to the broader Arqaam network.
Arqaam has been hurt by meagre trading volumes and low liquidity in its domestic market.
Other local investment firms have reportedly been circling the Egyptian market to take advantage of low equity valuations. Reports in September suggested that Shuaa Capital was looking at Egypt's Beltone Financial and HC Securities. Shuaa declined to identify the companies in which it might be interested.
"Acquiring a brokerage platform in Egypt is an important extension of our strategy … across the Mena region and emerging markets," said Dennis Wijsmuller, Arqaam's chief operating officer.
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