Hermes, the UK manager that grew out of managing the BT Pension Scheme, is looking to increase its exposure to Egypt to take advantage of growing corporate lending in that market.
The manager took a position in Commercial International Bank (CIB) early this year, which has since generated capital appreciation of 28% in dollar terms since March. The purchase of the stake was made in light of what Hermes saw as an investment environment “showing more encouraging signs of stability.”
Egypt’s market is improving, Hermes says, including growing corporate credit, amid signs that international companies such as Coca-Cola, Mars and Procter & Gamble are increasing local capital expenditure to boost local production.
Furthermore, there are signs that other Middle Eastern investors and donors are looking to invest in areas such as infrastructure in Egypt. Local banks will be pivotal in managing the flows of this money, which also puts CIB in a stronger position, Hermes suggests.
The policy environment has also stabilised, with signals that the government is considering structural reforms to the economy.