T. Rowe Price bullish on Egyptian stocks

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CAIRO: An investigation into Ezz Steel’s chairman over links to ousted Egyptian President Hosni Mubarak poses little threat of nationalization, said T. Rowe Price’s Middle East fund manager, who is upbeat on Egypt’s prospects.

Egypt’s public prosecutor has frozen the assets of more than 180 businessmen and officials who could have prospered because of their links to Mubarak’s regime.

Among those being investigated is Ahmed Ezz, a top official in Mubarak’s party, who is charged with illegally taking control of state-owned Al-Dekheila Steel, which then supplied Ezz Steel with steel at reduced prices, causing Al-Dekheila heavy losses.

But Joseph Rohm, who still holds Ezz Steel in his $370 million Middle East and Africa Fund, is sanguine about the firm’s future.

"The risks of there being a nationalization of the company are limited. I’m not saying it’s not a risk, but the steel story in Egypt is particularly attractive," he said.

"The last thing the Egyptian government wants to do is to penalize some of the companies that are the backbone of the Egyptian economy."

Buying Egypt

Since Egypt’s stock market reopened after a seven-week closure, Rohm has bought Egyptian stocks such as Orascom Construction Industries and is bullish about the country’s recovery.

Rohm said he was impressed by the "steady hand" of Egypt’s new finance minister Samir Radwan at a recent meeting in London.

"In terms of where I thought Egypt would be two months ago, it has way exceeded expectations."

Shares in Cairo plunged more than 10 percent when the bourse re-opened on March 23 but are inching back to levels seen before it closed on January 27.

Other African stocks, dumped by regional funds facing heavy redemptions but unable to reduce their Egyptian exposure, are also attractive buys, Rohm said.

He favors Nigeria, but has lowered his exposure due to the postponement of elections.

Consumer stocks, such as Nestle Nigeria and Guinness Nigeria, are top of Rohm’s shopping list, as well as infrastructure companies like Dangote Cement and lenders Zenith Bank and Guaranty Trust Bank.

Banking on banks

In emerging Europe, portfolio manager Leigh Innes is keen to play the oil price boom that has lifted Russian shares more than 17 percent so far this year.

Innes also favors Russia’s underpenetrated domestic banking industry and has her biggest holding in Sberbank.

Her $800 million fund is slightly underweight Turkey, which faces headwinds from its rising energy bill and record current account deficit, but she is optimistic about Turkish banks in the long term.

"You’ve had some pretty consistent returns throughout the crisis and right now that’s reflective of the overall health of the sector," Innes said.

Banks hit by big recent reserve requirement rises, have outperformed, rising 2 percent on Wednesday and up 7 percent this week.

But in Poland, where the government expects to get at least $3.5 billion from the sale of state assets in 2012, Innes is wary of too many companies coming to market.

"There’s quite a lot of new equity issuance in Poland, Russia. That brings some good opportunities but I am slightly aware of the risk of quite a lot of supply."


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