HSBC Investment Bank is aiming to open an investment banking and brokerage unit in Egypt by the end of next month, once it receives approval from the local authorities. The move shows that foreign banks are becoming increasingly interested in the possibilities for capital-raising and corporate advice as economic liberalisation opens up the region’s markets.
‘We hope to be up and running by the end of March,’ says Duncan Agar, who heads the bank’s Middle East and Africa operations. The new unit will be a joint venture between HSBC Investment Bank and Egyptian British Bank, both part of the HSBC Holdings group. It will have 12 investment banking staff and 12-15 staff on the stockbroking side.
Egypt’s Capital Markets Authority is expected to approve the bank’s application for a licence. HSBC already has a small investment banking office in Dubai, and has commercial bank subsidiaries and affiliates throughout the region. The bank does not have immediate plans to open dedicated investment banking units in other Arab states, Agar says.
Spurred by a series of privatisations, the Egyptian stock market has become one of the strongest performers in the region, and one of the most attractive to foreign investment. The official market index has risen by about 60 per cent in the last 12 months. ‘We’ve been looking at Egypt for the past two years and dealing in the market for the last 18 months,’ says Agar. ‘The market has real potential long-term. It isn’t just a flash in the pan. Our experience elsewhere in the world tells us that unless we have a local presence, we’ll be squeezed out [by local brokers].’
Demand for corporate advice and mergers and acquisitions expertise is expected to grow across the Middle East in the wake of privatisation – Egypt, as one of the more open economies, is likely to be ahead in this. HSBC is also one of several Western banks competing for mandates to raise equity in international markets for Egyptian companies.
HSBC Investment Bank is lead manager for a global depositary receipt (GDR) issue for Al-Ahram Beverages Company, formerly the state brewing monopoly, and is expected to pursue the mandate to arrange another GDR for Misr International Bank (MIBank). Agar says HSBC’s competitive edge will come from its international experience and network, though it will aim for domestic business. ‘If it was only companies looking to raise money in the international markets, it wouldn’t be worth it [setting up an investment banking unit in Cairo].’ He adds that the bank is currently working on a regional investment fund.