Emirates NBD, Dubai’s largest lender, is planning to focus on exploring equity investments in Saudi Arabia and Egypt between now and the end of 2019, according to senior officials at the bank’s asset management division.
“At the end of last year, we have identified Saudi as the story for this year and we converted an existing fund of ours into a Saudi fund,” Salman Bajwa, CEO of Emirates NBD Asset Management, said in a media roundtable event held in Dubai on Wednesday.
Bajwa said the Saudi fund had raised around $52 million and a return on investment of 18 percent so far this year. The bank’s asset management division hopes to end the year on $100 million, according to previous reports by local media.
In Egypt, the bank has not yet allocated a fund but is planning to explore opportunities there next year, according to Bajwa.
Saudi Arabia is the Middle East’s largest economy, while Egypt, the region’s most populous nation, is the Arab world’s third largest economy. The UAE is the second-largest economy in the region.
Both countries have gone through massive changes over the past three years. Saudi Arabia has introduced a series of social and economic reforms that included lifting a decades-old driving ban for women and cutting subsidies to combat a sharp fall in oil prices. Egypt has floated its currency in November 2016, a move that was shortly followed by a series of subsidy cuts and the introduction of a new and enhanced investment law.
Emirates NBD Asset Management officials said times of uncertainness and change can lead to opportunities.
“Saudi (stock) market is up 14 percent,” said Richard Lee, senior portfolio manager in Emirates NBD Asset Management, referring to the market’s performance from the start of the year until the end of June. He places Egypt’s percentage over the same period of time between 7 percent and 8 percent.
The officials cited the increase in local workforce, the drop in remittances and the country’s high foreign reserves as good indicators of the kingdom’s economic development. The Saudi Arabian Monetary Authority (SAMA) reported a 6.74 percent decline in the kingdom’s foreign remittances last year, compared to the previous year, local media in Saudi Arabia and the UAE reported quoting Arabic newspaper Al-Hayat said citing SAMA.
Emirates NBD Asset Management said figures they obtained from SAMA showed that remittances had dropped from $42 billion in 2015 to $38 billion in 2017. Zawya was unable to obtain the figures from SAMA’s website.
Saudi Arabian central bank’s foreign assets climbed by $13.3 billion month-on-month to $498.9 billion last April, it’s highest level in over a year, according to Reuters.
In Egypt, the officials forecast the inflation to drop from the current level of 17 to 20 percent to 13 to 14 percent, a percentage Lee expected to be “manageable”.
Egypt’s annual urban consumer price inflation fell to 13.3 percent in March, hitting a low that was not reached since May 2016, shortly before a currency devaluation in November of the same year pushed prices up sharply, according to Reuters. Inflation climbed to a record high of 33 percent in July 2017 following energy subsidy cuts.
Lee also praised Egypt’s efforts to increase its production of gas, which he expects will make the country self-sufficient in a period from “two to three years”.
“Tourism activity is starting again. All of this will bring growth for Egypt and that will feed into the earnings of the Egyptian companies,” he added.
Saudi Arabia is expected to be listed on MSCI emerging markets index by mid-next year, a move the officials said will bring more transparency and credibility to the Saudi market.
(Reporting by Yasmine Saleh; Editing by Shane McGinley)
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