Egypt competes for investor money amid global crisis

By Manuela Badawy

NEW YORK, May 24 (BestGrowthStock) – Egypt is competing for
foreign investors’ stock listings at a time when risk
tolerance is thin and turmoil in the global economy has
reduced confidence that there will be a swift recovery.

Despite investors’ aversion to risk, Egypt’s stock
exchange plans to launch a new derivatives product during the
second half of next year. Recently, the exchange launched
Egyptian depositary receipts, or EDRs.

“The Egyptian depositary receipts product allows foreign
companies to list in our exchange, exactly like ADRs in the
New York Stock Exchange,” Maged Shawki told Reuters on the
sidelines of investment bank Beltone Financial’s sponsored
conference on the Middle East.

Egypt, an emerging market country, with a growth rate
close to 5 percent even at a time of global economic downturn,
“has the second best stock market performance in the emerging
world, according to MSCI,” Shawki told investors in New York.

Egypt is likely to attract $7.5 billion in foreign direct
investment in the fiscal year 2009/2010 and could reach $10
billion in 2010/11, according to government data.

Egypt’s stock exchange, with a market capitalization of
$90 billion, has 213 companies trading a daily volume of 150
billion shares.

LIQUIDITY BOOST

The first company to list its shares as EDRs on the
Egyptian exchange was Swiss-based Orascom Development Holding
(ORDH.CA: )(ODHN.S: ).

Its chief executive, Egyptian Samih Sawiris, told Reuters
that by issuing EDRs traded in Egyptian pounds, it creates
more liquidity for the company’s shares, of which he owns 61
percent.

The firm would enjoy more liquidity because only 12
percent of Orascom’s total shares free float, as most
shareholders, including hedge funds, “hold the stock for
years, and buy when the price falls,” Sawiris said. “They
don’t sell.”

The stock exchange hopes to attract companies from the
Gulf Cooperation Council, or the GCC. Egypt’s stock exchange
is in discussion with two regional firms, but its CEO would
not specify details.

“It’s a new product and we started this product in the
peak of the crisis,” Shawki said.

Sawiris, a billionaire investor who is also Orascom’s
chairman, said the economic downturn had a positive side
because it cleared speculators from the market.

Orascom has projects in major resort towns in Romania,
Montenegro, the United Kingdom, Switzerland, Oman, the United
Arab Emirates, Jordan, Morocco and Egypt.

“It is a simple formula. The land is for free and we
pre-sell all of our real estate before we begin to construct.
The carry cost of that is nothing,” Sawiris told Reuters on
the sidelines of the conference.

The firm has four existing projects, El Gouna being the
flagship project, a full-fledged town on the Egyptian Red Sea
coast that houses 25,000 people on a permanent basis.

“Governments don’t risk anything and the upside is huge,”
Sawiris said “Give me a piece of desert and I will give you
tourism.”

Stock Investing

(Reporting by Manuela Badawy; Editing by Jan Paschal)

Egypt competes for investor money amid global crisis