MENA funds suspend redemptions on Egypt market woes

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DUBAI: Investment funds operating in the unsettled Middle East North Africa (MENA) region are refusing redemption requests by clients following a prolonged closure of Egypt’s bourse and a slump in stock market values.

Egypt’s stock markets are due to reopen on Tuesday after remaining shut for a month, and funds with exposure to Egypt have found it difficult to meet withdrawal requests from clients amid rising political tensions in the region.

EFG-Hermes, Egypt’s biggest investment bank, has suspended redemptions in some of its funds, two sources said on Monday.

The Cairo-based bank, which has up to $6.2 billion in assets under management, suspended client withdrawal calls in three of its funds, including its MENA fund, said one of the sources, who did not want to be identified.

Amongst leading funds operating in the region, EFG has the maximum exposure to Egypt, the sources said, adding that the firm has not been able to meet redemption requests due to the market closure.

"EFG will (be) issuing net asset values (NAVs) as soon as the Egyptian exchange opens," a spokeswoman for the company said. She would not comment on whether redemption requests had been refused.

Dubai-based Rasmala Investments also suspended redemption requests in its MENA fund as it found it difficult to calculate net asset values after the closure of Egypt’s stock exchange.

"We suspended subscription and redemption requests for three weeks and will re-list the fund when markets open," Eric Swats, head of the firm’s asset management division said.

Swats said the fund’s overall exposure to Egypt was 2.5 percent and it had allocated 10 percent of the portfolio in cash.

Funds generally block redemption requests when they do not have enough liquid assets available to pay investors.

One source estimated that MENA funds may have seen outflows of between 10 percent to 20 percent after the unrest which first began in Tunisia and has since spread to Egypt, Libya, Bahrain and Oman.

"Political uncertainties are unresolved and I’m worried about some of the dedicated MENA funds that have closed redemptions," says Walid Shihabi, Shuaa Securities chief executive in Dubai.

"They will probably re-open redemptions once Egypt’s bourse reopens and that would put more pressure on markets."

Egypt, which accounts for about 2 percent of MSCI’s Emerging market index, saw its benchmark index plunge more than 16 percent in just two days in January following protests that ousted president Hosni Mubarak.

The stock market is expected to open Tuesday after being closed for a month following the unrest.

Continuing unrest has delayed the market’s reopening several times in the last few weeks and analysts have been bracing for a possible sell-off of shares as investors flee risk and fund managers off load stakes to meet redemption requests.

EFG agreed to buy a 65 percent stake in Lebanon’s privately owned Credit Libanais for $542 million last year aiming to diversify its business. –Additional reporting by Matt Smith, Editing by Andrew Callus


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