Financial crisis gives retail brokers a boost – relatively

Alex Dziadosz
5 Min Read

CAIRO: The financial crisis hit Egyptian brokerages hard last year – but some much harder than others.

Foreign flight was the story of the year, as investors exited in droves after their portfolios were broadsided by the financial crisis. One upshot has been that firms whose clients are mainly local retail investors have started to contend with brokerages that had dwarfed them just a year ago.

Pioneers Holdings, now the largest retail-focused brokerage in Egypt, is one such case. In a ranking of the country’s 145 brokerages by value, Pioneers climbed from fifth to third place over the course of 2008, even as its value shrunk from nearly LE 17 billion to less than LE 6 billion.

But Pioneer’s losses were small compared with those of Beltone Securities, whose clients are mostly institutional. Beltone fell from first to fifth place in the same set of rankings as its value dwindled from LE 100 billion to just over LE 3 billion last year.

“In terms of percentage, our market share is improving because our focus is on retail business, said Pioneers board member Khaled El-Tayeb. He said that 90 percent of Pioneers business is local, while Prizma Securities, the company’s institutional wing, has a larger foreign presence. Prizma, by contrast, fell to 46 from 33 in the brokerage rankings last year.

Retail traders have dominated the Egyptian exchange for the last few months, explained one senior Beltone trader who spoke on condition of anonymity because the source was not authorized to speak to the press.

Institutions, about half of them foreign, account for an estimated 70 percent of Beltone’s trading. “Retail is a small part of our business, said the Beltone source.

Yet shrinking trade volumes have not prompted the firm to change its strategy significantly, the source continued. Analysts still expect foreign investors to come back to Egypt once stability returns abroad.

“If you have a client in the US or the UK, basically he’s waiting for the conditions of his work to be better before he will invest in a foreign market. Everyone is still interested in Egypt and the region, but they’re still waiting.

El-Tayeb, however, said he is confident Pioneers can maintain the market share it captured last year. “Our focus now is on our local market and Gulf countries, he said. “To be frank with you, I don’t think that foreigners are going to come back soon.

EFG-Hermes Holding, Beltone’s primary rival for foreign clients, has also seen its value tumble, though it has maintained a relatively strong position among local brokerages. The Financial Brokerage Group, EFG’s wing for institutional clients, stole the top spot from Beltone in 2008, even though its value eroded from over LE 95 billion to about LE 9 billion. Hermes Securities, the firm’s retail and “high net worth wing, meanwhile climbed from fourth to second place in the rankings.

“Definitely we were affected by what’s going on in the financial crisis, said Mohammad Ebeid, head of foreign institutional sales at EFG. But the heaviest losses came from the Gulf region, which had generated as much as 40 percent of their business at one point, he said.

Throughout the turmoil, the internet brokerage Arabia Online, has been one consistent winner. Over 2008, it steadily rose from 14th place to 7th.

As 2009 wears on, El-Tayeb said that he expects to see “a new map of Egyptian brokerages emerge.

Earlier this week, the Egyptian Stock Exchange said it will add six companies to its benchmark CASE 30 index, including Pioneers Holding and investment bank Naeem Holding. The exchange said it will add the six most actively traded shares not previously on the index starting Feb. 1.

“A large number of companies will disappear after the crisis, he said, particularly small ones. “Most of them now, they don’t earn anything. It’s very hard for them to break even.

Share This Article
Leave a comment