Sell-Side Overview
To say 2020 was a challenging year would be an understatement. The COVID-19 pandemic roiled markets in ways no one could have expected, with lockdowns across the world hampering economic activity, investor sentiment dwindling, and markets experiencing sizeable volatility as a result. The pandemic uncovered numerous deficiencies in the financial system we were operating in, with markets that were even teetering on vulnerability before the pandemic suffering major setbacks. Having said that, EFG Hermes’ sell-side divisions surpassed expectations in 2020, coming out on top once again to post another year of solid operational and financial results all while deepening and expanding its product and service roster.
Our Securities Brokerage division performed well during the year, maintaining top rankings across our footprint as market activity began to pick up toward the end of the year on the back of a resumption in economic activity spurred by vaccine optimism. The division ranked first on the Egyptian Stock Exchange (EGX), both the Dubai Financial Market (DFM) and NASDAQ Dubai and the Kuwaiti Stock Exchange (KSE). It placed second in Abu Dhabi and secured a third-place spot in Oman. While we continued to hold on strong to our leading rankings in MENA markets, it was our frontier division that performed exceptionally well in 2020, with the division reaping the rewards of the work they’ve put in to enter Sub-Saharan Africa and South and Southeast Asian markets. The division ranked first on the Kenyan exchange for the first time and placed second by value traded in Nigeria based on a calculated strategy to expand both its retail and high net worth investor base.
The Investment Banking division outperformed all expectations during the year, and even managed to close an IPO for Dr. Sulaiman Al Habib Group on Tadwaul — a major achievement considering global market conditions. While the division had lined up several ECM and M&A transactions across the FEM space, most ECM activity was dampened during the year due to the pandemic. As a result, the division ramped up its capabilities in the DCM space, an asset class that the division had already built the foundations for in years previous to hedge against turbulence in equity markets. We booked an incredible 24 transactions for the year, 14 of which were DCM transactions at a value of USD 757.6 million.
EFG Hermes’ Research division continued to lead the provision of in-depth, real-time market insights in the region, especially as global market conditions continually shifted during the year. The division was named leading Frontier Research House and second MENA Research House by Institutional Investors’ 2020 poll. During the year, it expanded its coverage to 20 new equities from key MENA markets and fast-growing FEMs; continued to diversify its product offerings; and successfully hosted two virtual investor conferences with global institutional investors that collectively manage trillions of dollars in assets.
Prospects for 2021 leave a lot of room for optimism, with the COVID-19 vaccine acting as the first step towards restoring normalcy across markets. We’re positive about a pickup across our footprint, with investors already showing signs that they’re looking to allocate bigger portions of their portfolios to FEM markets. A weaker dollar and higher equity valuations in other parts of the world have only served to accelerate the pickup we were seeing at the end of 2020. FDI inflows are also expected to rise, increasing local currency values and subsequently lowering interest rates, which will further accelerate business activity.
In terms of operations, our priorities in the new year will remain largely unchanged. On the geographic expansion front, we will continue to look for new markets to penetrate as we build our on-the-ground presence across geographies characterized by solid growth fundamentals and strong investor interest. We’re looking to deepen our foothold in key frontier markets by replicating the success we’ve seen in our home market of Egypt and use this strength as a springboard into other markets. On the Investment Banking front, we’re also keen to continue to expand our product offering, capitalizing on the headway we’ve made in the Egyptian debt space in particular, especially with our securitization and sukuk offerings, as we continue to diversify our revenue streams. We have lined up a solid ECM and M&A transaction pipeline for the year ahead, particularly in Saudi Arabia where we anticipate a significant increase in activity. Coupled with the incredible strength of our Research division, which will continue to expand in scope and breadth to offer clients the in-depth coverage they have come to expect from us, we are confident that we have the tools in place to capitalize on the expected upswing in FEMs. All in all, it is shaping up to be an exciting year for each of our Sell Side teams, and I am confident that 2021 will be yet another record-breaking year for all our divisions.