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Abu Dhabi, UAESaturday 17 November 2018

Exclusive: EFG Hermes steps up coverage of frontier markets in Africa and Asia

Unit CEO Ali Khalpey sees investor appetite in Nigeria, Bangladesh and Pakistan

Traffic passes through Nigeria's commercial capital Lagos, where EFG Hermes will acquire a local brokerage house and rebrand it to EFG Hermes Nigeria. Akintunde Akinleye for The National
Traffic passes through Nigeria's commercial capital Lagos, where EFG Hermes will acquire a local brokerage house and rebrand it to EFG Hermes Nigeria. Akintunde Akinleye for The National

Egyptian investment bank EFG Hermes is expanding its presence in high-growth frontier markets including Nigeria, Bangladesh and Pakistan to service investor clients, and Vietnam is its next target, said divisional chief executive Ali Khalpey.

The lender aims to complete the acquisition of Lagos-based Primera Africa – announced in July – “in the next 10 days”, as it deepens its presence in Nigeria. The brokerage and research house, which services local and foreign investors, will be rebranded as EFG Hermes Nigeria, Mr Khalpey added.

In Vietnam, a young population, rising quality of education and calls for the Southeast Asian economy to be included in the MSCI Emerging Markets index helped Vietnam’s stock market to become Asia’s best-performing last year.

“Vietnam is high on our agenda and our next target market, and we are in the early stages [of establishing a presence] there,” said Mr Khalpey, who is chief executive of EFG Hermes Frontier division, in an interview with The National on Sunday.

However, there remain regulatory barriers to investment and EFG Hermes may not set up a presence in Vietnam until after 2019, according to Mr Khalpey. The lender currently conducts transactions through an affiliate Vietnamese bank.

EFG Hermes announced its intention to expand its frontier markets unit last January, when Mr Khalpey was appointed chief executive. The division, which has a particular focus on securities brokerage, investment banking and research, has since progressed its expansion strategy in five markets.

These are: the UK, where it is now fully licensed to service a broad spectrum of frontier markets; Kenya, where it has a greenfield presence; Nigeria; Pakistan; and Bangladesh, where it opened a representative office in January.

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The Lagos acquisition will help the bank establish Nigeria as a hub to service other West African markets. Nigeria itself has broadened its appeal through reforms including currency devaluation since 2016, which has resulted in “lots of mis-priced assets that create smart investment opportunities”, said Mr Khalpey. “Nigeria will always be a talking point for investors.”

Bangladesh is one of the markets he is “most excited” about, despite high barriers to entry. The Asian economy, which is growing at around 6-7 per cent annually and enjoys a stable political environment and young, educated population, could emerge as the biggest beneficiary of the US-China trade spat because of its sizeable textiles industry, which competes with that of China, he told The National.

“As Chinese textiles manufacturing becomes pricier, people may look to Bangladesh as a replacement,” he said. However, the country faces a degree of currency risk. As China and its other neighbours devalue, Bangladesh could lose its competitive edge.

Mr Khalpey is also optimistic about Pakistan, whose new government is “finding its feet and aligning itself with high profile investors” as it seeks to weed out corruption.