EFG-Hermes Holding SAE, the Cairo-based investment bank expanding into frontier markets, may only start operations in Nigeria in 2018 because of the country’s challenging economic conditions.
The Eyptian based investment bank plans to start operations in Kenya in the second half as regulators prepare to approve the lender’s brokerage license.
The company will begin by offering institutional trading and research, Ali Khalpey, the chief executive officer of EFG-Hermes Frontier, said by phone from Dubai on Wednesday. A license will probably be granted in the “very near term” once formally cleared by the Nairobi Securities Exchange, Paul Muthaura, CEO of Kenya’s Capital Markets Authority, said in an interview in the capital, Nairobi.
“The first step is a brokerage license and as we establish our presence on the ground we will expand into investment banking,” Khalpey said. “We are talking to people about recruitment, but we will wait for the license to become active. We are looking at a 10 to 15 person office. We would love to grow that as we add new products.”
EFG-Hermes is seeking to tap demand from an increasing number of institutional investors allocating funds to frontier markets because of slow growth in many developed and emerging markets. Kenya’s economy expanded 5.8 percent in 2016, the fastest pace in five years, while the nation’s bourse is seeking to boost trading and liquidity by adding single-stock futures, currency derivatives and exchange traded funds.
“Their coming into the country is a very strong vote of confidence in the potential and growth of our markets,” the CMA’s Muthaura said.
The overall research division at EFG-Hermes plans to increase its coverage to more than 200 stocks from 155 currently, the company said in January. Khalpey joined EFG-Hermes from Exotix Partners LLP and has previously worked at BlackRock Inc., Investec and Renaissance Capital LLC.
“We are looking at Kenya as a hub for East Africa given the proximity to Tanzania, Uganda and Rwanda,” Khalpey said. The country also has big banking and telecommunications industries and newer market-opportunities in fintech and mobile-phone app developments that could result in initial public offerings and share sales, he said.
“Bangladesh and Vietnam look extremely interesting to us,” Khalpey said. “In the longer term, there is an aspiration for us to be in these two markets.”