Discovering Value In MENA Equities Guide to Discovering value in MENA...markets. Equally important...

The 2011 guide toN

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Published in conjunction with:EFG HERMES

Discovering Value In MENA Equities

Research in the fore as the region takes off 2

Overview: The region’s time has arrived 3

Strategy: Prospects grow for opening up Saudi Arabia 6

The preference for a move to domestic exposure 7

A tale of two economies 8

Banks continue to rely on government spending 9

Saudi banks look to the young 10

Real estate: opportunities in diverse markets 11

Industries enjoy a unique global competitive profile on 12low energy prices

Telecoms: Saturation time for voice opportunities 13

New spending power and investment opportunities 14

EFG Hermes contacts 15

This guide is for the use of professionals only. It states the position of the market as at the time of going to press and is not a substitute for detailed local knowledge.

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Contents

Research in the fore as the region takes off

The Middle East region offers investors an exciting opportunity. It

has two highly prized assets: favourable demographics and sound

economic fundamentals.

The demographic trends in the region are very positive. Some 60%

of the population is under 30 years old, presenting an enormous

and under-used resource. Coupled with the young and growing

population are diversified economies at an early stage in the

industrial life-cycle, backed by a wealth of natural resources.

As the economies of the region move forward, we expect the capital

markets to become deeper and more sophisticated. This would lead

to an increase in the number of listed equities across the region. It

is extraordinary that listed stocks in a region with this vast potential

account for a fraction of the capitalization of the global emerging

markets. Equally important is the need for further development at

the levels of corporate governance and capital market regulation.

While this area of the industry has moved forward in leaps and

bounds over the past decade, more can be done. Improving access

to markets and information will serve this region better and will

unleash its underlying potential.

Some companies have moved towards international standards

and practices faster than others. The overall changes that have

taken place at the corporate level during the past 10 years towards

becoming more ‘investor-friendly’ are nevertheless impressive.

Standards of transparency in some companies match the best in

emerging markets.

Such improvements in the access to data have enabled research

departments greatly to raise their game. The research published has

become more useful, more targeted and ultimately more conducive

to making a well-informed investment decision.

To make the most of the region’s opportunities, investors need top-

quality research. That is where EFG Hermes comes in. EFG Hermes

has one of the largest teams of dedicated analysts in the entire

MENA region, offering investors first-class coverage of the Middle

East and North Africa. Our people are on the ground across the

region, watching the latest developments and, most importantly,

putting them into a useful context.

With this opportunity ahead of us, with the prospects of the region

so attractive and within our grasp, research can only get more

important, more valuable for you as investors and more fun for us

as practitioners and observers of one of the most dynamic regions

in today’s global economy.

Th e Middle East is becoming the most dynamic region on earth, poised to move forward at an extraordinary rate. Investors need to take a closer look. By Wael Ziada, head of research, EFG Hermes

Wael Ziada, head of research, EFG Hermes

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The region’s time has arrivedThe Middle East story is a region in the throes of modernization and globalization. It is an untapped resource with latent potential. Fresh thinking from its leaders has the power to harness this resource. By Nick KochanThe MENA region is on the brink of a massive re-evaluation. This is

based on many factors. First of all, the economic strength of many of

its hydrocarbon-rich economies now ensures that it is particularly well

positioned to emerge from the global economic crisis with its industries

enhanced and its global investment portfolios widened. Second, its

primary resource of oil and gas has shown itself a sustainable source

of extended income and wealth. Third, the current political changes

put it at the threshold of a new era of economic development, once its

transition is accomplished. Fourth, its market regulators have taken on

board the necessary changes to laws and regulations, so moves are now

in place, albeit moving at a slower pace than many would like, to open its

markets to foreigners. This will have very profound implications for the

global investing community as well as for local companies. Fifth, govern-

ments have shown foresight in embarking on a series of diversifications,

so reducing dependence on oil and gas. Finally, global investors, alert to

these seismic developments, are preparing to move the region as an as-

set class bit by bit from frontier status to emerging-market status.

Post-global economic crisisMost but not all Middle Eastern institutions have tended to take a

highly conservative stance to investing outside their own country, let

alone their own region. Their preference for markets they understood,

the fact that many of their richest institutions were state-owned or

controlled, and the fact that their wealth was such that they did not

need to leverage it with currency and other risks entailed in global in-

vesting, ensured that funds were invested in highly conservative instru-

ments when the international crisis broke in 2008. It also meant that

their banks were domestically orientated ensuring that they were not

exposed to risks that they did not understand and that were outside

their control. This stance, which looked so risk-averse before the crisis,

served the region well.

It has produced many institutions and companies, both state and

privately owned, which are sound, well managed and financial secure.

Recovery in external and private consumption activities has been

notable in Dubai. This economy was regarded as the most outward-

looking pre-crisis but, when international investors in real estate were

hit, Dubai’s real estate markets – and companies linked to its develop-

ment – took the brunt. This impacted on the Dubai government, which,

in 2009, was forced to sell $10 billion-worth of bonds to the UAE to

ease its liquidity problems. Today, Dubai is seeing strong recovery, with

its plans to be the global financial hub of the region – symbolized by

its development of the Dubai International Financial Centre serving

global financial institutions and markets – unaffected.

The oil priceIt has often been observed that the region divides neatly between

those that produce oil and gas and those that do not. The produc-

ers have been the beneficiaries of a strengthening of the global oil

price over the past decade. Indeed, Monica Malik, EFG Hermes chief

economist, believes that an oil price of $100 a barrel for Brent crude is

comfortable for GCC fiscal positions, with budget breakeven oil prices

below this level except for Bahrain, despite the robust growth in gov-

ernment spending over multiple years.

The rise in oil prices means that growth is expected. For GCC coun-

tries, growth is predicted to reach 7.8% in 2011. For Qatar, EFG Hermes

expects real GDP growth of 11.5%. Growth is also expected in non-oil

sectors in these countries. The growth of non-oil sectors in 2011 is ex-

pected to be about 5.3% in real terms. The expansion in the non-hydro-

carbon sectors is partly linked to government investment programmes,

in particular in Saudi Arabia and Qatar.

Ahmad Shams El Din, EFG Hermes director, research, materials and

chemicals, says: “The strength of the oil price benefits governments

that have oil resources, local countries that produce and refine the

oil, and local countries that buy oil at low and subsidised prices for

incorporation in their products. These companies are most particularly

fertilizer and chemical companies. They have a competitive edge on

their global competitors by being able to buy the energy raw material

at much lower prices than other producers, who are forced to pay

global energy prices. The difference between the local and internation-

al energy price is the basis of their profitability.” The concern for these

Source: IMF WEO Database

Oil exporters cumulative current account surplus since 2000

companies is the trend towards the removal of subsidies in Egypt and

Saudi Arabia, as governments seek to support their budgets. The oil

price, it has been noted elsewhere, would need to fall to $30 before

international producers could match local firms on raw material costs.

This extended period of high oil prices has led to the building of

substantial sovereign wealth funds in the region’s main producers and

it has led to budget surpluses in many countries, in particular Qatar

and Kuwait – the strongest economies in the region.

Kuwait, for example has two reserve funds – the Fund for Future

Generations and the General Reserve Fund – both managed by

Kuwait Investment Authority, which took seventh place in the SWF In-

stitute Ranking in 2010. KIA has a 25% stake in Kuwait Finance House,

which in 1977 was established as the first bank operating according

to Islamic Shariah law.

The prospects of political changePolitical risk has been an endemic feature of the region since it took

its political shape over the course of the last century. Today’s upheaval

in a number of its members has added a new dimension to that risk,

but scarcely adds to its severity. Indeed, there had been a prevailing

sense for a number of years that a generational change in leadership

was long overdue. The means with which transition would be ac-

complished were as yet ill-defined. We now have a better sense of the

means for this disruption.

The importance for investors of the transition in Egypt, Libya, Tunisia

and potentially Syria, the four countries where change has been or

is in the process of being accomplished, is less the form or colour of

regime that results than the speed and clarity of the process. The longer

the process of governmental shift, the greater the scope for investor

concern. The decline in tourism, especially to Egypt, and the collapse

of FDI levels represent predictable short-term shocks, the result of the

instability created by political disruption, says Jan Pawel Hasman, EFG

Hermes lead analyst on real estate and tourism.

That said, the speed with which the new national leaderships, replac-

ing former unelected leaders and their families, have set about building

institutions gives confidence that the new map will be drawn quickly.

While the look of that map is less important than the speed with

which it is produced, some thought needs to be given to the impact

of the change on economic factors. The new leaders have given

little indication of economic policies. Many of these leaders are little

known and their qualifications for economic management have yet

to be tested. Their prevailing democratic approach would suggest

that they anticipate delegating and distributing economic wealth

from the centre; this represents a marked change from the approach

of their predecessors, who retained wealth in a few hands. Wealth dis-

tribution will benefit consumers and domestics markets. It will also,

over time, raise the penetration of banks and access to household

credit in the region.

The outlook for Tunisia, for example, in the wake of its election, is

promising. The interim government announced a $1.5 billion stimulus

package and requested help from the World Bank for a programme

to increase jobs, improve transparency, increase social and economic

inclusion and support private sector-led growth. The moderate Islamist

Ennahda leaders, recently elected, have endorsed this policy.

Political change in many regional countries has prompted others

to reward loyalty. The reserves of accumulated wealth have enabled

wealthy local countries, notably Saudi Arabia and Qatar, to increase

spending on government salaries, with state employees benefiting

from pay hikes of 60% in Qatar. Private sector institutions have followed

suit, giving outsize pay increases to employees. They have come under

pressure from central authorities to restrain retail prices.

This injection of liquidity has underpinned domestic commercial

banking and consumer stocks, while boosting GDP growth. This may

be seen as a windfall for local economies, and introduces an element of

stability from which investors can benefit at a time when international

New beginnings in Egypt

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markets are experiencing uncertainty and seeking new directions and

fundamentals are being re-evaluated. “Consumer, banking and retail

stocks have been particularly dynamic over the last year,” says Wafaa

Baddour, EFG Hermes director research, consumer.

The timing of the redistribution is well judged as leaders begin

to understand the power of their demographics. The growth in the

Middle Eastern population presents a valuable resource for builders

of economic growth. Failure to harness this resource carries risks, as

the recent political unrest demonstrates, but offers important rewards

when harnessed efficiently. All leaders face the challenge of dealing

with unemployment, although the problem is especially acute in Egypt

(the largest country by far in the region with a population of 84.5 mil-

lion), where some 30% of young people are without jobs. The country’s

macro-economic fundamentals are also challenging. Egypt’s deficit

represents about 8% of its GDP, general inflation stands at 10% and

food price inflation is running at 17%. Prices for staples such as rice and

sugar rose by 10% even after the revolution, in the month of June.

Modernization of economies and marketsBoth at a corporate, at a political and at an economic level, investors

can see a willingness to engage with international standards of gov-

ernance. “This will enhance efficiency and transparency while building

confidence in the boardrooms and governments. At a corporate level,

there are clear signs that Middle Eastern companies have embraced

international accounting, banking and business rules of engage-

ment,” says Wael Ziada, EFG Hermes head of research. So international

accounting standards are applied by many companies; Basle II – and

increasingly Basle III – liquidity and solvency levels have been adopt-

ed by all banks in the region. Stock markets across the region are

showing a willingness to remove restrictions on foreign ownership of

stocks, although many would like to see this process moving faster, in

particular in Saudi Arabia. The modernization of Saudi companies is

demonstrated by its inclusion at number 12 in the ‘Ease of Doing Busi-

ness index’, compared to a regional MENA average of 93.

On a political level, the more conservative countries, like Saudi

Arabia, are allowing women to vote in council elections, while

parliaments, even in the more traditional monarchies, have received

enhanced powers. The impact of the Arab Spring is likely to further

this process.

The need for diversificationThe regional markets will gain further investor support as they build

more diverse economies and industries. Oil dependence exposes the

country to the cyclical price movements of commodities. Limitation

on oil supplies and the long-term prospect of replacement of oil by

alternative energy sources adds further instability. Countries like Bah-

rain, which has built up a substantial aluminium sector, show the way

forward to a more diversified economy. Bahrain’s strength in Shariah-

compliant banking further enhances the economy. The Saudi govern-

ment is improving infrastructure; in particular it has plans to build six

‘economic cities’ to diversify its economy.

By 2020 Oman hopes to reduce oil revenue to just 9% of its

income, by boosting income from sources including tourism, re-

export, heavy manufacturing and information technology, through

its Knowledge Oasis Muscat complex. Belatedly the state is starting

to exploit its mineral wealth, including chromite, dolomite, zinc,

gypsum, silicon, gold, copper and iron. Libya also has a diverse

economy, with 20% of GDP accounted for by non-oil sectors, from

processing of agricultural goods to (more recently) the production

of iron, steel and aluminium. The leaders of the National Transition-

al Council have made overtures to international investors to seek

participation in rebuilding its war-torn infrastructure.

Re-rating of the regionThe culmination of the factors outlined above has been a re-

assessment by global indexes of the Middle East Region. The

perceived rigidities in the governance of the region’s markets

and companies, rather than the size of its economies, meant that

it been allocated ‘frontier’ status, and was included in frontier

indexes.

The region’s capacity to show that its institutions are sound, are

embracing more modern governance standards and are increasingly

outward-looking has been taken on board by international investors,

says Ziada. This message will lead in time to its inclusion – although

not all countries will move simultaneously – in the emerging market

bracket.

ConclusionThe Middle East story is powerful and convincing. It is based on

clear evidence that this is a region in the throes of modernization

and globalization. It is, in a sense, an untapped resource with latent

potential. Fresh thinking from its leaders has the power to harness this

resource. The new look of the Middle East will be forward-looking and

optimistic, at a time when many established and developed markets

look old and tired. That is the Eastern Promise. The region’s time has

only just arrived.

2011 GCC budget breakeven oil price ($/barrel) Potential for stock market deepening in UAE and Egypt

Source: Bloomberg, Stock ExchangesSource: Ministries of Finance and EFG Hermes estimates

Strategy: prospects grow for opening up Saudi ArabiaSaudi Arabia and its neighbours are taking cautious steps towards opening up their equity markets to foreign investors. By Nick Kochan

Saudi Arabia has long maintained a policy that prohibits foreign inves-

tors owning shares on its exchange. Indeed, it is the last frontier market

to exclude direct foreign ownership of shares. Yet investors have long

watched with great interest a market that is the most heavily traded in

the MENA region.

They also witness some signs of an opening up in the kingdom, albeit

at a cautious and conservative rate. The government has begun to

permit private sector and foreign investor participation in the power

generation and telecom sectors. As part of its effort to attract foreign

investment and diversify the economy, Saudi Arabia acceded to the

World Trade Organization in 2005 after many years of negotiations.

As a sign of such an opening up, foreigners have been allowed to

make indirect investments in the Saudi stock market. “This has to be

done via an equity swap. Foreigners are not allowed to own the shares

directly; rather, they own the derivatives. The investor is able, through

this mechanism, to benefit from the change in price of the underlying

asset but does not have actual ownership rights to the equity itself,”

says Fahd Iqbal, EFG Hermes director research, strategy. This suggests,

in the view of some observers, that the kingdom’s markets are making

their way towards allowing foreigners to own shares.

The impact of the opening up of Saudi Arabia to foreign share owner-

ship would be considerable given that it has both greater liquidity and

a greater breadth than any other regional market. It is likewise surpris-

ingly efficient regarding how shares are priced. Investors have noted

the market’s efficiency in pricing.

Restrictions elsewhereThe exclusion of foreign investment in local markets in Saudi Arabia

represents the most comprehensive restriction but it is far from the only

country to impose such a barrier. Restrictions also exist in the UAE and

Qatar, although they are less comprehensive than those in Saudi Arabia.

In the UAE, for example, federal laws require nearly all types of foreign-

owned company to have at least 51% of their shares owned by a UAE

national or a company wholly owned by UAE nationals (in the case of

some activities, this threshold is even higher). Where these restrictions

have been eased at federal level in the past, this has been to the extent

of allowing only citizens of other GCC member states exemption from

the 51% UAE national shareholder requirement. However, the “govern-

ments of the individual emirates have sought to encourage FDI by allow-

ing foreign investors 100% ownership of companies operating in the free

zones,” says Murad Ansari, EFG Hermes director research, banking.

These restrictions may be lifted as the UAE and Qatar, currently treated

as frontier markets, seek to negotiate their reclassification as emerg-

ing markets. The designation as ‘frontier market’ typically applies to

economies and financial markets that are less developed than emerging

markets and that have more restrictions on foreign ownership.

Over the past few years Saudi Arabia has been taking slow but

steady steps to liberalize and deregulate a wide variety of aspects of its

economy, including the financial sector. That has slowly opened it up to

non-Saudi national investors.

Any change in rules governing foreign involvement would come from

the Capital Market Authority. This was established in July 2003 under

the Capital Market Law (CML) by Royal Decree No (M/30). The CMA is

the sole regulator and supervisor of the capital market, it issues the

required rules and regulations to protect investors and ensure fairness

and efficiency in the market.

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Saudi Arabia has the potential to be a sizeable emerging market

Source: Bloomberg

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The preference for domestic exposureIn the current challenging global environment, investors are finding succour in domestic demand. By Nick Kochan

Strategic directions are currently determined by two key factors. On the

one hand, there is an unprecedented level of uncertainty in international

markets, reflected in a macro-economic weakening, with the oil price and

many commodity prices under pressure. On the other hand, some posi-

tive developments in local markets are visible, with particular strength

in domestic demand-driven stocks – such as banks and retailers – which

have benefited from government domestic spending, according to

Simon Kitchen, EFG Hermes vice president research, strategy. These two

factors justify emphasizing domestically-focused stocks and limiting

exposure to the global cycle. This decision has been justified by the ongo-

ing uncertainty and continues to determine our posture.

As a result of this re-orientation, EFG Hermes currently prefers stocks with

exposure to domestic demand like banks and retailing, to those more

exposed to global demand, such as petrochemicals, says Kitchen. Sectors

related to infrastructural investment are also likely to perform, as govern-

ment focus on building infrastructure – especially in Saudi Arabia – has

not shifted.

The challenge to investors building this domestically-oriented portfolio

is undoubtedly the limited number of quoted players. “The listed sector

does not have the benefit of the wide range of names to be found in

Western Europe,” says Wael Ziada, EFG Hermes head of research. However,

both Saudi Arabia and Qatar have utility companies, Saudi Arabia and

Egypt have consumer companies, while GCC countries have significant

listed pharmaceutical concerns. The region has a number of telecommu-

nications operators, although these are mostly state controlled.

Low beta and high-yield stocksIn addition to the traditional stocks, Fahd Iqbal, EFG Hermes director

research, strategy, says investment should focus on a number of other

criteria. First, there are companies with a low beta, that is to say that

stocks that are relatively less affected by market sentiment and market

movements. Such companies are likely to have assets with underlying

quality, which may not be fully reflected in the prevailing price. Low beta

assets fulfil the strategic need for a defensive orientation. Such a strategic

view will tolerate flat-lining on the basis of trade cycles, and serve as a

hedge against volatility.

Second are companies that offer attractive dividend yields. The MENA

region is unique in that companies tend to have a structurally higher divi-

dend payout ratio, in part due to the prevalence of state-owned entities.

Focusing on low beta and high dividend yield names can limit downside

risk for investors.

EFG currently limits its exposure to the global cycle, but fertiliser stocks

are an exception. This sector differs from other more cyclical sectors as it

is fundamentally well underpinned. Firstly, the peak agricultural season

arises in the fourth quarter. Secondly, this period coincides with high

export tariffs being implemented in China (the Chinese government

implements high tariffs periodically and over a well-defined window).

During this period, Chinese exports do not enter the market, thus keep-

ing supply tight and prices sustained. The agricultural story also has very

compelling long-term supportive fundamentals from population growth

and demographic changes.

The strength of the domestic story is well grounded, though there is

a risk of a slowdown in the face of a sharp economic downturn, in turn

leading to a shock to oil prices. However, sustainably lower oil prices are

not expected and EFG Hermes maintains expectations of close to $100 a

barrel, says Iqbal.

Low correlationCorrelation between global emerging markets and global developed

markets has been consistently high – over 85% or 90% – since 2006. On

the other hand, the correlation of the MENA region to global markets has

varied between zero and up to 50%. In addition, the trend has not been a

very steady one, with correlation increasing sharply as a result of shocks

and unexpected global events. In short, correlation between MENA and

the rest of the world is low, providing a strong opportunity to at least

diversify your portfolio, says Kitchen. This suggests a compelling reason

for foreign investors to consider diversifying portfolios to include MENA

representation.

The realization that today’s frontier markets stand at the point where

emerging markets stood 20 years ago is a further indicator of the region’s

potential for predictable growth. Emerging and global markets have devel-

oped since 1980 from a low correlation in the early period, of some 20% to

80% in the later period. Such a correlation was stimulated by an increase in

foreign investment and foreign market penetration. The MENA markets can

be expected to take a similar path, with the move from frontier, through

emerging, to a fully mainstream investing destination.

Middle East & North African markets have a low correlation relative to global markets

Sou

rce: EFG H

ermes C

alculatio

ns

A tale of two economiesThe high price of oil is sustaining the GCC countries but elsewhere in the region political instability is a disruptive factor. By Nick Kochan

Two factors have been crucial in determining economic conditions in

the region in 2011 and going forward. The first is the recent political

turmoil, termed the Arab Spring. A number of countries have been af-

fected; some have lost governments, others have had to take measures

to forestall instability. Either way, the impact on the economy and

stability has been dramatic. The other factor is the strong government

spending, especially by GCC counties supported by FX reserve positions

and the price of oil. Oil, the key economic driver of the GCC countries,

has held up well, and is likely to continue to do so, in the face of instabil-

ity on international markets.

For countries in political flux, the medium term will be governed

by the speed with which countries make their transition to a stable

government. In short, “next year is going to be a very important year in

defining the new look of many countries, notably in Egypt and Libya,”

says Monica Malik, EFG Hermes chief economist.

Both are undergoing profound changes. Egypt is starting on parlia-

mentary elections, which will last from November 2011 to March 2012.

This will be followed by the drafting a new constitution and presiden-

tial elections. The process is likely to extend to H2 2012. This is creating

uncertainty, says Mohamed Abu Basha, EFG Hermes Associate, for

research, economics. He says this is made none the easier by the fact

that many of the leading players are relatively inexperienced.

The result of the political developments and uncertainty has been a

notable deterioration in the key external and domestic components of

the economy, including a steep decline in investment. FDI into Egypt

has been nearly zero since the revolution, compared with an average

of $8 billion annually in the previous two year. Foreign purchase of

Treasury bills has fallen sharply, pushing up the cost of funding the

deficit. Likewise, tax revenues will likely fall with the weaker economic

activity, a further blow to the fiscal position.

Spending to stay afloatMeanwhile, for the GCC the price of oil has proved a stabilizer and has

supported sentiment, along with the robust government spending. De-

spite a period of jitters in international markets, the price of Brent crude

has remained above $100 a barrel. Foreign exchange reserves in Kuwait,

UAE and Saudi Arabia stand at over 100% of GDP, with Qatar seeing

strong growth in its reserves and fast approaching this level. “These coun-

tries are in a relatively strong position globally and able to spend heavily

to keep economies afloat and populations supportive,” says Malik.

Government spending is expected to remain strong by historical stand-

ards in 2012, but unlikely to maintain the record levels seen in 2011. Thus,

while the headline growth numbers are likely to weaken in 2012 with

the deceleration in government spending and lower production levels,

the outlook remains strong. EFG Hermes expects government spending

to remain solid even in the event of a fall in the oil price as long as oil

remains above $70 a barrel for Brent. With their strong reserve positions,

GCC countries can afford a fiscal deficit.

Qatar and Saudi remain EFG Herme’s top economic picks for the

region, with greater progress being made with the implementation

of their investment programmes, along with solid private consump-

tion activity. Meanwhile, Dubai is seeing a strong performance on the

external side, which is also resulting in a pickup in domestic consump-

tion activity.

However, high oil prices have added additional pressures on oil

importing countries, which have been forced to continue paying

very significant government subsidies on fuel, along with food prices.

Across the region, governments’ ability to pass on rises in fuel prices

has been limited by political positions. Morocco has made the most

progress in implementing fiscal reforms in the past and has had the

most liberalized period of prices, which have passed through to the

consumer.

The non-GCC countries have also increased spending, but are not in

the same position as the hydrocarbon exporters. Moreover, these coun-

tries have been dependent on FDI to support investment, but since

2008 this investment has been falling with global developments as fo-

cus has shifted to domestic needs. Nevertheless, in Egypt, for example,

there is pressure to reform subsidies. They will also need support from

foreign countries to support their fiscal deficits. Egypt is in discussions

to conclude agreement with the IMF over a funding package, which is

absolutely critical.

Digesting reformPolitical reforms are being attempted in the monarchies of Jordan

and Morocco to ensure stability. But there are concerns as to how

far-reaching these reforms will be, and the extent to which they will

be accepted. The economies of both countries are digesting these

changes, while analysts assess their impact. Jordan is very dependent

on GCC funding, in terms of both FDI and grants. Morocco has a more

solid economy, but has stronger external linkages to the eurozone.

GCC countries have also increased their focus on job creation, a key

challenge for the region, along with some gradual signs of political

reforms.

Algeria is not seeing the same political challenges, despite a history

of political instability. Algeria has also increased spending to limit po-

litical and social tension. Nevertheless, despite having gas reserves, the

structural position of the economy is weaker than the hydrocarbon-

rich group. Recent legislation has been regarded as less than helpful to

foreign investors, says Malik.

The closure of Lebanon’s border with Syria, as a result of unrest in

Syria, has taken its toll on Lebanon, which relies on Syria to provide its

only land route to the Levant hinterland. Lebanon has also been host

to many tourists from Syria and Jordan. Domestic issues also remain

for Lebanon, including challenges linked to the Special Tribunal for

Lebanon and the need for fiscal reform to tackle its debt burden.

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Banks continue to rely on government spendingPrivate corporate investment in the GCC is showing signs of recovery after the financial crisis, but most banks remain dependent on public spending for lending opportunities. Elsewhere, political instability has been a brake on investment. By Nick Kochan

Government spending has been the main driver of growth for GCC

banks over the past couple of years, since the global financial crisis.

This is likely to remain a key driver of lending opportunities for banks

in most parts of the region over the short term, and especially in Qatar

and Saudi Arabia. One possible exception is Kuwait, where implementa-

tion of planned government spending tends to lag behind other GCC

countries.

The private sector, GCC-wide, went through a deleveraging phase

in the wake of the financial crisis. We now see some signs of recovery,

in particular in Qatar, with regard to private corporate investment.

“This is likely to be a precursor of wider growth, although that has yet

to come through outside the strongest hydrocarbon-rich countries.

Increases in salaries to Qatar government employees have been

matched by some private companies and this will lead to higher retail

spending, fuelling retail lending demand,” says Elena Sanchez-Cabe-

zudo, EFG Hermes director research, banking.

Loan growth slows in Egypt on political uncertaintiesOutside the GCC, private sectors retain their momentum, in

particular in Egypt and Morocco. However, political instability has

restrained corporate investment in Egypt during the period of

interim government. The market awaits November’s elections and

corporate borrowers are in a wait-and-see attitude pending the

outcome. Clearly they would like to see the elections run smoothly

and be followed by the introduction of suitable policies. Recent

developments have hampered banking sector growth very signifi-

cantly, compared with 2010, which was a very strong year. That said,

some private sector banks continue to report growth in the loan

book, although this tends to be the financing of working capital

and short-term lending to corporates rather than project finance or

lending related to investment.

Nevertheless corporate investors remain on the whole positive

about the medium- and long-term growth potential of the Egyptian

economy, and corporate investment might resume next year follow-

ing some clarity over political transition in the country.

Qatari growthIf one looks for areas of growth within the GCC, the places to look

are Qatar and Saudi Arabia, where buoyant hydrocarbon sectors

power the economies forward. There is also a resumption of real

estate buoyancy, further adding to growth. Government spend-

ing in Qatar is not only focused on the hydrocarbon sector but

also on infrastructure, with large projects providing opportuni-

ties for banks’ asset growth. The retail sector in Qatar has enjoyed

some spill-over benefit from government spending and the salary

increases announced in September, coupled with regulatory cuts

in retail lending rates in April this year, both factors being positive

catalysts for growth in personal lending.

Qatari banks have been key financiers of the government’s

investment programme, and the 10% increase in the share capital

in a number of Doha Stock Market (DSM)-listed banks by the Qatar

Investment Authority (QIA) in January 2011 has to be seen in the

context of the Qatari government ensuring that banks are in a posi-

tion to fund the investment programme.

Moroccan banks move aheadIn the wider region, one should acknowledge how Moroccan

banks have developed. Banking services have outpaced those else-

where in North Africa and beyond. The development of leasing and

factoring, for example, shows that these institutions are prepared

to move outside basic banking business, giving them an important

edge over some international competitors. “The largest banks have

expanded outside their domestic market and moved into sub-

Saharan African countries, such as Senegal and Cameroon, as well

as Tunisia,” says Sanchez-Cabezudo.

Growth in the retail banking sector in Morocco has been ahead

of that in Egypt, the closest market comparator in terms of income

per capita and the structure of the economy. The two countries also

have low hydrocarbon reserves per capita, compared with else-

where in the GCC. Both countries are dependent on external flows,

such as tourism and remittances, exports and FDI.

Moroccan banks have also benefited from a surge of activity in

the local economy prompted by a fall in interest rates over at least

the past decade. This has brought the cost of debt to levels much

lower than many countries in the region, in particular Egypt. The

Moroccan mortgage market has been a beneficiary of this macro-

economic trend.

Resilience in LebanonBanks in the Levant, in particular Lebanon, have shown considerable

resilience throughout its own internal political instability. Banks are

the main lender to government in Lebanon, where public debt-to-GDP

levels are around 140%. Budget deficits are funded by the banking

sector, while 50% of assets are either lodged with the government or

the central bank. One of the main sources of income to banks is their

lending to the government. The stability of the banks is further founded

on low loan-to-deposit ratios of between 32% and 35%.

Lebanese banks have expanded into other regional markets, in

particularly focusing on countries with low penetration levels and

low levels of competition. Lebanese banks can be found in Syria,

Egypt and Sudan, enabling them to diversify.

Saudi banks look to the youngSaudi Arabia’s young and growing population offers a long-term opportunity for its banks, which also benefit from the fact that the government has the resources to keep investing during the downturn. By Nick Kochan

The biggest opportunity for Saudi banks is that the country has a

young and growing population. Almost 60% of the population is under

30. Large numbers of young people are entering the labour force and

will require banking services. This is a long-term opportunity.

In the short term, Saudi banks spent 2009 and 2010 dealing with

asset-quality issues, in particular the prevalence of non-performing

loans. These have been largely addressed. “Banks have very strong and

defensive balance sheets and high capita-adequacy ratios. These enable

them to lend in a growing economy,” says Murad Ansari, EFG Hermes

director for research, banking.

The Saudi government has the ability and muscle to spend its way

through the economic downturn, thanks to reserves of more than $400

billion. The government has announced a number of projects, show-

ing its intention to continue spending to improve infrastructure and

diversify the economic base. This is also the strongest feature of Qatar,

the region’s fastest-growing market, but Saudi Arabia is not far behind.

Saudi Arabia moves at a slow pace but offers a strong short-term and

long-term opportunity for banks, enhanced by the quality of domestic

assets on their balance sheets.

As far as compliance with international regulations goes, Basle III is

still a work in progress for the region’s banks, who have sufficient time

for implementation. But Saudi banks are already compliant with most

of the basic regulations covering levels of capital and liquidity. “Saudi

banks are completely Basle II-compliant, and the regulator is expected

to move in line with international standards. More changes can be

expected but on most benchmarks they are in step,” says Ansari. The

banks typically use low levels of leverage, and have used deposits and

existing capital to grow their business; their level of borrowing from

international markets or external institutions is relatively low.

Their position is further enhanced by the fact that there is no hybrid

capital in the banks. The majority of capital is tier 1, so they are strongly

positioned to meet international requirements.

Conservatism reinforces stabilityBanks in the region more widely have tended to be conservative, rein-

forcing their stability. This has been enforced by the role of the central

banks, which have encouraged the banks to maintain a minimum capi-

tal adequacy level of 12%. The minimum requirement in Saudi Arabia

has been 12%, way above international standards.

The only direct impact of the global financial crisis as far as Saudi

banks were concerned arose from their limited exposure to the interna-

tional markets. Banks tended to adopt a policy of some diversification

in geographic spread of assets, with some invested in international

markets, some in regional markets, but most assets were invested in the

domestic market, protecting them from the worst effects of the crisis.

Almost 90% of the risk-weighted assets of Saudi banks are domestic,

with 3% elsewhere in the Middle East, 3% in the US and 3% in Europe.

Exposure to assets outside the region is thus no more than 7%.

The banks did have to sustain some pain on their international

exposures, particularly funds invested in global markets through

external fund managers. However, profitability levels of the banks were

sufficiently robust to absorb the impact.

Tight regulation by the central bank is also a feature of Oman, where

there are restrictions on the amount of investment allocated to external

assets. With the UAE serving as the hub for the region, banks in the UAE

are more regionally diversified in their exposures. Strong loan-growth

rates during the boom years and comparatively slower deposit growth

meant that banks became relatively more reliant on long-term funding

than their regional peers through debt issuances in the international

markets. Islamic banking has provided a key element in Saudi banking.

The country has three commercial banks that offer only Shariah-

compliant banking services – Al Rajhi, Albilad and Aljazira – and other

conventional banks have Islamic banking windows. “Banks are allowed

to carry out both services under the same umbrella. All banks offer

Islamic banking services,” says Ansari. Islamic banks tend to be more fo-

cused on the retail side, with larger retail depositor bases and consumer

lending a significant part of the business. More than 50% of Rajhi’s

lending book – Rajhi has the largest market share in retail – consists of

retail loans. This is twice the sector average. Albilad has a similar retail

orientation, although it has a much smaller balance sheet.

Saudi population structure

Source: EFG Hermes estimates

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Real estate: opportunities in diverse markets Most of the MENA real estate markets are underpinned by strong fundamentals, with young populations, an expanding middle class and low household ownership. Significant discounts to fair values of real estate equities pose numerous long-term investment opportunities. By Nick Kochan

The picture for real estate is rather diverse across the region. Afford-

ability constraints and demand-supply gaps characterize most of the

markets while some areas historically marked by speculation face

oversupply, lack of real demand and challenging leverage introduced

in boom times when hopes for quick gains were high.

In Saudi Arabia, for example, where real demand for housing is

significant, there are affordability constraints, because of lack of pre-

sales or an efficient mortgage market. In contrast, the UAE market still

pays its price for overenthusiastic project offerings, with over-supply

having taken its toll on current rental yields and sales prices. Mean-

while, some of the market players face financing concerns as the

fragile market does not provide enough cashflow for debt service.

”The market fundamentals in Egypt and Saudi Arabia are strength-

ened by the presence of young populations with very low housing

ownership. There is also a rapidly growing middle-income class with

its increasing aspirations,” says Jan Pawel Hasman, the lead real estate

analyst at EFG Hermes. However, Egypt’s real estate market is crippled

by legal and regulatory concerns related to historical land grants and

Saudi Arabia does not have the proper means to address affordability

constraints. The problem was compounded by a law in Saudi Arabia

that barred the sale of a property before it was built, a convenient

way to make it more affordable for the buyer. This practice is preva-

lent in many GCC countries and Egypt. The lack of significant leverage

in Egypt and Saudi Arabia shielded investors from severe price

declines in the recent cyclical downturn. The development of law to

facilitate mortgage lending is perhaps the most critical factor in the

expansion of the property sector in the Kingdom, while bureaucracy

and the high cost of lending in Egypt also need to be addressed.

Once these obstacles are removed, these markets are likely to boom

again. These two markets have populations that need housing, and

increasingly have the means to acquire it. “There is some sign that

the introduction of a law to facilitate mortgages might make some

progress in Saudi Arabia in the medium term. Local banks are cur-

rently reluctant to participate in the real estate market,” says Hasman.

Meanwhile, the UAE market has been historically characterized by

active speculation and significant leverage, used by buyers financing

their transactions through mortgages and also by developers eager

to invest in rental portfolios but having insufficient equity. Lack of

direct taxation encouraged creative fair-value accounting used to

inflate asset book values on excessively optimistic assumptions to

borrow more. The property market in the UAE has yet to recover

from the practices of this period.

”Prices and rents in the property sector in Abu Dhabi and Dubai

are under pressure because of over-supply, the result of the buoy-

ancy that ruled in the marketplace three years ago,” says Hasman.

The situation in Dubai is gradually becoming more promising.

Demand for properties in very well-established, luxurious commu-

nities, with good facilities and amenities, shows a modest pick-up

as tenants seek upgrades at still preferable rates. Rents for villas, for

example, have remained firm over the past months, with freehold-

ers finding they are able to modestly raise their rents.

Tourism hit by political instabilityMost prominent real estate companies have exposure to the

tourism market through hotel portfolios. The Egypt-based Talaat

Moustafa Group, for example, one of the most liquid on the local ex-

change, has a valuable hotel portfolio including the Four Seasons-

operated hotels. They are capable of providing relatively stable

cashflows, often denominated in hard currencies, in times of real

estate downturns. They also act as good collateral for additional

leverage when needed.

The impact of recent political instability has been particularly

apparent in the region’s key tourist hub of Egypt. Carriers have

responded to the instability by simply shifting routes, expecting

Egyptian destinations not to be profitable for the time being. Mean-

while, big European tour operators sourcing arrivals to the country

focused on marketing alternative packages. Local tour operators

are highly depending on cooperation with foreign companies for

sale of their services, while low pricing is their main competitive

advantage.

While Egypt struggles to build its trade some positive messages

have been coming out of Dubai, which is showing some resilience.

This suggests that there is still some space for additional supply.

Industries enjoy a unique global competitive profile on low energy pricesLow energy prices help local petrochemical companies stay competitive in global markets. By Nick KochanThe fertilizer and petrochemicals sector in the MENA region enjoys a

unique competitive profile globally stemming from low energy prices,

which put the region’s feedstock costs at a fraction of those of the

world’s main producing countries. With ample oil and gas reserves,

the development of large-scale downstream industries was a strategic

imperative for the MENA countries to monetize hydrocarbon resources

and diversify their economies away from oil and gas. This initiative

materialized in 1975 through the establishment of the Saudi Basic

Industrial Corporation (SABIC) in Saudi Arabia. MENA’s chemicals sector

has grown exponentially since then, adding numerous plants and build-

ing several partnerships and joint ventures with industry’s key global

players, particularly in Saudi Arabia and Qatar, through a win-win for-

mula: technology in return for cheap feedstock. Now the MENA region

is home to some of world’s largest and most profitable petrochemicals

and fertilizer plants.

Investors in companies involved in fertilizers and petrochemicals are

making a play on global energy price inflation, because of producers’

access to relatively fixed, significantly cheaper feedstock costs in a

global context, which allow them to make some of the world’s highest

margins. Natural gas is the main petrochemicals feedstock in the MENA

region, while naphtha (crude oil derivative) is the world’s main feed-

stock (particularly in Western Europe and Asia). Gas prices range from

$0.75 per million British thermal units (mBTU) in Saudi Arabia to $3/

mBTU in Egypt. In Qatar, gas prices are $2-2.5/mBTU. Heavier feedstock

types in the MENA region (such as propane and butane) are priced at a

25% to 30% discount to naphtha prices (Japan FOB).

In an era of high energy prices, MENA chemicals producers usually

benefit from the cost pressures on their global peers, which lift floor

commodities prices upwards, and the difference goes straight to their

profits. That said, the escalation in energy prices triggered migration of

basic chemicals capacities from the traditional production hubs in the

US and Western Europe to the Middle East because of its significant

cost advantage over Asia because of strong domestic demand and to

government strategic targets to reach self sufficiency in basic materials.

While the competitive advantage of Middle Eastern producers is

unrivalled, price hikes in energy and feedstock are expected, particularly

in Egypt, as the governments seek to phase out energy subsidies, and

in Saudi Arabia, where the current gas price mechanisms have been in

place over the past two decades. So Saudi Arabia is likely to increase

its gas price to between $2 to $3/mBTU (from $0.75/mBTU currently), if

one would assume Saudi will meet the Qatari and Bahraini benchmark.

”These producers will retain an absolute cost advantage over local pro-

ducers in the main consuming markets in Asia, and also maintain their

strong competitive edge over the US exporters, their main competitors

in China, who currently pay around $4.4/mBTU,” says Ahmad Shams El

Din, EFG Hermes director, research, materials and chemicals.

Hypothetically, the oil price would have to fall to $30 a barrel for

Brent crude for an international producer in Western Europe or in Asia

to meet the global cost advantage of a local producer in Saudi Arabia

or in Qatar. Egyptian producers could also face higher gas prices. They

currently pay $3/mBTU but as the Egyptian government removes or

phases out energy subsidies, this is likely to rise to $5. ”Some impact

on the sector’s profitability seems inevitable, but it will not destroy the

competitive advantage of the local producers,” says Shams El Din.

Fertilizer and petrochemicals companies are price takers and so they

are naturally exposed to global supply and demand dynamics. The

uncertainty over the global macro-economic outlook, following the

sovereign debt crisis in the eurozone and signs of economic slowdown

in the US and China, naturally poses downside risks to global commodi-

ties prices and to MENA chemicals earnings. However, the magnitude of

any correction in commodities prices should be much less severe than

2008’s free fall because of structural changes in the global inventory

cycle, supply/demand conditions and corporate financial positions.

In petrochemicals, investments in new ethylene capacity have been

limited since 2008 and global supply is set to grow by only 2% in 2011-

13 (compared with a 4% compound annual growth rate in 2005-08).

In fertilizers, the MENA region and China account for most new global

supply. Global urea supply should grow by a CAGR of 4.5% in 2011-13,

of which almost 52% will come on stream in China, which should have

a limited impact on global markets because of the strict export tariff

scheme in the country (China applies an aggressive 110% export tariff

during its peak agricultural season). Ironically, major capacity increase

outside China is scheduled in the MENA region.

In short, the story is low energy prices and attractive low-cost capacity

expansions, which enable MENA producers to weather any correction

in global commodities prices. The impact of economic slowdown on

global chemicals prices should be much less severe than 2008’vv free

fall because of structural changes in the global inventory cycle, supply/

demand conditions and corporate financial positions.

Q3 2011 ethylene costs by region ($/tonne)

Source: CMAI, EFG Hermes estimates

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Telecoms: saturation time for voice opportunitiesMobile internet and data services are the focus for telecoms operators in a saturated market. By Nick KochanThe voice telephony market appears to be approaching saturation

point in the MENA region, and more specifically in the GCC. Conse-

quently, operators are now focusing on data; most countries now have

3G licences. They are concentrating on ways of enhancing this area,

such as value-added services, mobile internet and mobile broadband.

These are the main drivers.

In Saudi Arabia, for example, Mobily, the second company to enter

the market, focused on means of tackling data technology. “The

management followed the right strategy seeing that in Saudi Arabia

the data area was still untapped and underpenetrated,” says Marise

Ananian, EFG Hermes vice-president research, telecoms. Its early

investment in data technology put this company in a very good posi-

tion; it is now one of the most technologically advanced companies

in the region.

Investment in data technology undoubtedly requires capital ex-

penditure, but it is capital spent in pursuit of new technology and more

revenue generation. Capex spending is usually high at the beginning

of the cycle (early phases of the technology). The new technology

involved will be 4G. Operators are expected to spend large amounts on

4G early next year, either introducing it then or by the end of the year at

the latest. Operators in the UAE and Saudi Arabia have started introduc-

ing 4G services on limited scales.

The GCC countries may appear more advanced than North African

ones. For example, Algeria still does not have 3G services, whereas all

the GCC members have it. The pace of new technologies in these areas

differs. Algeria has great potential in telecoms. The Egyptian business-

man and politician Naguib Sawiris was an early investor there and

made considerable profits, but he encountered major problems two

years ago with the Algerian government, which opposed his wish to

sell Orascom Telecom’s operation (Djezzy) in Algeria.

“The capital required for 4G is not as high as analysts supposed; 3G

may have been more expensive when it was first launched, because

it represented a breakthrough and an advance in data speed. But the

difference between 3G and 4G, or 3.5G, will not be so enormous,” says

Ananian. In any case, it is too early to assess 4G, as the handsets needed

to use it are still not widely available.

Mergers off the boilRegarding mergers and acquisition activity in the region, it is now less

likely than a couple of years ago. Each individual operator is either gov-

ernment-owned (in the case of very large ones, such as Etisalat in the

UAE or STC in Saudi Arabia) and these governments are not likely to sell

their stakes, or, in the case of single-country operators, they are owned

by the big ones. Consolidation could only occur if two medium-size

or big operators were willing to merge, says Ananian. The few chances

of a government selling their stakes or selling new licences could be

Omantel in Oman (where the government owns 70%), Libya (many GCC

operators would be interested in buying one of the operators there or a

new licence), Syria and Lebanon.

The rest of the MENA region is fully liberalized. Even Egypt has only

one-fixed line operator but the government is unlikely to issue a new

licence and this monopoly will most likely remain. The voice fixed line is

a business in retreat, and there would be no interest in a second licence.

Opportunities exist only in very selective countries. In other words it is

a saturated market.

Demand is always there, but the GCC is very different from North Af-

rica. The GCC members are relatively rich countries, with high revenues

compared with such countries as Egypt. In terms of average revenue

per user per month (ARPU), the two regions are not comparable: for

example in Egypt it is $6; in the UAE, more than $30.

However, growth potential could be greater in North Africa than in

the GCC states. GDP per capita is, of course, much lower, so the revenue

that can be generated is lower. In the GCC, mobile voice telephony

has penetrated more than 110% of the population. People there often

have two or three SIMs. This explains why there is increasing invest-

ment in the value-added services, in data and voice bundles and in new

technologies.

Mobile penetration rate in the MENA region

Source: ITU, EFG Hermes

Consumer: new spending power and investment opportunities Saudi quoted consumer and retail companies’ results are boosted by higher consumption, while Egyptian companies show mixed results as Egyptians focus on the basics for now. By Nick Kochan

Pay increases and bonuses in the public and private sectors have

stimulated consumer activity in some countries in the region, such

as Saudi Arabia. This addition of liquidity to the market, largely by

government, but quickly followed by private-sector companies, has

pump-primed the consumer and speciality retail sector. Monthly

point-of-sale transactions, published by Saudi Arabian Monetary

Agency (SAMA), surged in value terms by an average of 37% year on

year over January to August 2011.

One of the key retail beneficiaries in Saudi Arabia has been the

luxury product market, with discretionary product sales surging.

Good evidence for this can be seen at the Jarir Bookstore, which

sells laptops and computer supplies, electronics (smart phones),

office and school supplies and books. Jarir posted a 48% increase

in its third-quarter net profit to SR152 million, from SR103 million

in the same period a year earlier. The chairman has said that he

also expects double-digit growth in the fourth quarter. He said that

demand was driven by growth in electronics (smart phones in par-

ticular) and tablets, where growth surged in the third quarter.

In Egypt the political instability has affected the consumer sector,

particularly durables, while the basic foods market remains resilient.

Food companies have largely maintained sales and revenues. The

strength of Juhayna for example, the largest dairy producer in

Egypt, is a weather vane for the food sector; it has shown double-

digit growth in revenue in the first half of 2011. On the other hand,

purchases of more expensive goods, such as cars and white goods,

have suffered as consumers have shown themselves to be cautious

about upgrading or renewing their more expensive possessions.

Salary increases in the public and private sectors have provided

some support but this was likely offset by the decline in tourist ar-

rivals (and consumption) and accordingly a higher unemployment

rate in the tourism sector. Sales of durables have seen month-

on-month improvements but remain well below 2010 levels. For

example, Egypt’s total vehicle sales declined 19% year on year, but

showed a month-on-month rise of 7% in September 2011 to 17,514

vehicles, according to a report by the Automotive Marketing Infor-

mation Council (AMIC). Economists say that they will be surprised if

private consumption grows as much as 3% in the coming year, less

than half the typical annual growth number of 5% or more.

There are big opportunities in Egypt for mergers and acquisitions

in the food-manufacturing segment and expansion in the retail

segment, although these are likely to be hindered by political and

security instability in the short term. The Egyptian consumer sector

is largely fragmented, with many companies in each segment, and

very few listed companies. Despite being highly populous, Egypt

has yet to build a retailing infrastructure to service the new con-

sumer. The country has very few large hypermarkets and super-

markets; the rest are very small baqalas and small supermarkets

owned by individuals. The country lacks the chains found in more

developed markets in the region such as Dubai. Carrefour and

Spinneys have however set up in Egypt to service the new middle

class, in addition to some other local chains (Metro Markets). In

short, the organized retail segment is believed to account for less

than 10% of the total food retail market. This is likely to change

as consumers follow movements outside Egypt and adopt more

modern lifestyles, where they opt to do their shopping in a single

place, at malls and shopping precincts. Additionally, new cities

in Egypt have seen higher residency rates by youths, and several

regional real estate developers are building Dubai-style shopping

malls to serve them. Such a trend will accelerate as income per

capita grows.

The longer-term opportunities for market growth are to be

found in countries that are currently on the cusp of a consumer

breakthrough, but where security and political issues are restrain-

ing activity, let alone expansion. Suppliers (including Egyptian

exporters) are eyeing markets such as Libya, which has enormous

promise after announcing the fall of its old regime.

“Pay increases and bonuses in the public and private sectors have stimulated consumer activity in some countries in the region, such as Saudi Arabia”

2011

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EFG Hermes research contacts

Monica Malik,

Director

Tel: +971 4 364 1902

Email: [email protected]

Economics

Mohamed Abu Basha,

Associate

Tel: +20 2 35356157


Mohamad Al Hajj,

Analyst

Tel: +9714 3641903

Consumers and Industrials

Wafaa Baddour,

Director

Tel: +20 2 35356163

[email protected]

Tarek El-Shawarby,

VP

Tel: +20 2 35356379


Hatem Alaa,

VP

Tel: +20 2 35356156


Nada Amin,

Analyst

Tel: +20 2 35356385


Khaled Sadek,

Associate

Energy & Utilities

Abid Riaz,

Director

Tel: +971 4 363 4005


Redwan Ahmed,

VP

Tel: +971 4 364 1905

[email protected]

Murad Ansari,

Director

Tel: +9661 279 8649


Financials

Elena Sánchez- Cabezudo,

Director

Tel: +97143634007


Shabbir Malik,

Associate VP

Tel: +971 4 363 4009


Jan Pawel Hasman

Associate VP

Tel: +20 2 35356139


Shaza El Kady,

Analyst

Tel: +202 35356158


Real Estate Development

Mohamed EL Hefny,

Analyst

Tel: +9714-3634010


Ahmad Shams El Din,

Director

Tel: +20 2 35356143


Rita Guindy,

Associate

Tel: +20 2 35356387


Youssef El Hussainy,

Associate

Tel: +20 2 35356013


Malak Youssef,

Associate

Tel: +20 2 35356044


Materials

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Marise Ananian,

VP

Tel: +20 2 35356152


Telecoms

Nadine Ghobrial,

Associate

Tel: +20 2 35356051


Omar Maher,

Associate

Tel: +20 2 35356388


Strategy & Data

Fahd Iqbal,

Director

Tel: +971 4 363 4004


Simon Kitchen,

VP

Tel: +20 2 35356144


Ahmed Difrawy,

VP

Tel: +20 2 35356144


Sales contacts:

Publication

Ahmed Gad,

Director

Tel: +971 4 364 1904


Rasha Samir,

Director

Tel: +20 2 35356142


Mohamed Aly,

Director, Institutional Sales

Tel: +202 35356052

Email: maly @EFG Hermes.com

Chahir Hosni,

Director, GCC Institutional Sales

Tel: +9714-3634090

Email: chosni@EFG Hermes.com

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