Overview

As the leading brokerage house in the MENA region, EFG Hermes Securities Brokerage offers its growing client base a range of diverse products and services and an unparalleled coverage of more than 75 MENA and frontier emerging markets. As at year-end 2019, the division held an on-the-ground presence in Egypt, Kuwait, the UAE, Saudi Arabia, Oman, Jordan, Pakistan, Kenya, Nigeria, Bangladesh, and offices in the UK and the US. During the past year, macroeconomic improvements seen in Egypt were overshadowed by geopolitical challenges in the GCC as well as fluctuating oil prices. Despite this, EFG Hermes Securities Brokerage successfully expanded its market share and trades executed across many of its MENA and FEM markets. At the end of 2019, the division held the largest share of market executions on the EGX, DFM, NASDAQ Dubai, and KSE, while finishing first on ADX.

The division’s growing client base ranges from individual retail investors to some of the most prominent institutional investors and high-net-worth-individuals in the region and the world. EFG Hermes Securities Brokerage’s all-encompassing portfolio of products and services is supported by the Firm’s award-winning Research division, which provides clients with real-time market intelligence and unique insights, and the division’s online trading platform, which allows for instant market access from desktops, laptops, and mobile phones.

Operational Highlights of 2019

EFG Hermes Securities Brokerage reported another year of solid operational results despite ongoing geopolitical tension in the MENA region.

In Egypt, positive momentum from the previous year carried over to 2019 with the Egyptian economy witnessing falling inflation rates, solid growth, and a cumulative interest rate cut of 450 basis points by the CBE. EFG Hermes maintained its number one ranking on the EGX, with the Firm’s market share increasing to 48% in 2019 from 43% in 2018. During the year, EFG Hermes concluded noteworthy IPOs including Eastern Company for Tobacco and Fawry and advised on stake sales at Egyptian heavyweights such as Cleopatra Hospitals Group and Ibn Sina Pharma.

In the UAE, the division captured most passive institutional flows during both the MSCI and FTSE rebalancing in the first half of the year, with foreign participation rising impressively, especially on the ADX. During the year, the division successfully increased its market share on the DFM (33.5% in 2019 from 21.5% in 2018) and NASDAQ Dubai (65.9% in 2019 from 62.9%), strengthening its number one spot on these exchanges. On the ADX, EFG Hermes’ market share was stable at 39.1% for 2019, securing a first-place finish.

In Kuwait, trading volumes surged at the start of the year on the back of rising local activity but soon returned to normal growth rates despite the upgrade to EM status by MSCI, rising foreign interest in the market, in addition to passive foreign flows amid the FTSE rebalancing in September. The division continued to rank first in the market, with a market share of 33.7% in 2019, capturing the lion’s share of foreign institutional flows during the year.

During the year, Saudi Arabia witnessed strong volume growth on the back of the market’s upgrade to EM status by both FTSE and MSCI in 2019. EFG Hermes successfully capitalized on this momentum, capturing a significant share of inflows from all tiers of investors, especially from Qualified Foreign Investors (QFIs) as well as local and GCC-based investors. As such, the Firm more than doubled its market share in 2019 to 6.1%, ranking fifth amongst pure brokers (non-commercial banks) and fourth amongst foreign brokers in the year.

The Omani market, which witnessed strong volume growth on the back of multiple special transactions during the year, recorded lower foreign participation resulting from a lack of liquidity on the market. Nonetheless, EFG Hermes’ ability to capture a solid share of local and GCC institutional activity enabled the division to maintain a steady market share of 18.4% in 2019, ranking fourth at the end of the year. Meanwhile in Jordan, EFG Hermes ranked sixth at the end of 2019 with a market share of 8.3%, with the Firm executing a cross trade in EICO worth JOD 10 million for some of its institutional investor clients.

Brokerage Rankings (percent of total market executions)

Frontier Emerging Markets

Despite generally adverse market dynamics, EFG Hermes Frontier strengthened its position in the territories it operates, advising on multiple key transactions throughout the year. It expanded its on-the-ground presence by strengthening its network of analysts and traders during the year, while also seeing an impressive rise in the participation of FEM-based companies at the Firm’s conferences. As such, EFG Hermes Frontier continued to make an important contribution to the Group’s financial performance for 2019.

Kenya reported a strong start to the year on the back of rising foreign participation before slowing down due to rising uncertainties regarding a proposal to repeal rates in 2019/20 and a shift toward fixed-income securities by local funds. Nonetheless, the division tripled its market share in 2019 supported by the Firm’s ability to capture the lion’s share of trades following the MSCI rebalancing as well as rising activity from institutional investors. During the year, the division also established a fixed-income desk and worked to map and onboard clients.

In Nigeria, EFG Hermes strengthened its market share in 2019 to 26.2% from 15.2% in 2018, with the division now ranking third. Trade volumes fluctuated, with strong growth at the start of the year on the back of the USD 5 billion MTN Nigeria Communications listing being outweighed by a slowdown due to investor hesitation in the face of unfavorable regulatory policies.

The Pakistani market witnessed a challenging year as persistent macroeconomic and geopolitical challenges including rising interest rates, fluctuating oil prices, a depreciating local currency, and mounting tension between Pakistan and India weighed down on total trades executed on the market. Nonetheless, rising participation from international investors in the second half of the year saw EFG Hermes strengthen its market share to 6.2% in 2019 from 4.9% in 2018. The division also performed well in Bangladesh, maintaining its top spot in terms of market share among international institutional investors trading in the country.

EFG Hermes One

Launched in 2017 in partnership with Saxo Bank, EFG Hermes One grants users one-click access to multiple global markets, seamlessly integrates the SaxoTraderGo platform to expand access and capabilities, and provides access to the EFG Hermes’ award-winning research products. The innovative online platform gives local and regional investors the ability to explore new opportunities in global capital markets as well as trade multiple asset classes from a single account from anywhere around the world.

In 2019, the recently revamped platform continued to gain traction among institutional and high-net-worth investors. During the year, the division worked toward white-labelling its online platform to leading financial institutions across the region. Having completed a test-run with a major regional bank and subsequently refined the product, the division expects to roll-out the white-labeled platform to regional financial institutions in the coming year.

Structured Products

2019 was another successful year for EFG Hermes Securities Brokerage’ structured product desk as revenues surged 78% to EGP 98 million in 2019. The strong results continued to be driven by carry trade attractiveness, although showing signs of slowing during the year, and favorable T-bill yields. EFG Hermes Securities Brokerage’s fixed-income desk was re-launched in 2018 as part of the Firm’s strategy to grow its debt capital markets business. The division recorded EGP 16 million in revenues from its fixed income operations in 2019.

Unique Corporate Access

In line with the Firm’s commitment to connect global investors with opportunities across its FEM footprint, EFG Hermes once again expanded its renowned investor conferences, increasing both the number of attending investors and companies, with strong participation from FEM-based businesses.

In March, EFG Hermes hosted its 15^th annual One on One Conference in Dubai, featuring the largest and most diverse group of participants to date, as the Firm leveraged its rapid expansion into FEM markets across four continents to attract leading investors and companies from all around the globe. This year’s event saw executives from 186 companies from 26 countries meet directly with more than 520 investors representing 260 institutions and family offices, managing an aggregate USD 11 trillion in assets under management. The conference, which featured a strong line of speakers from innovative global companies who offered fresh perspectives on expected trends in FEM, took place under the headline “Navigating the Path to Opportunities”.

Later in the year, EFG Hermes hosted its 9^th annual London Conference, once again offering participants a necessary platform to explore key potential investment opportunities across FEMs, learn about global investor appetite, and hear from one of the leading research houses in FEMs about what is shaping and moving markets. The event, held once again at Arsenal’s Emirates Stadium, was attended by 360 leading global fund managers representing 182 global institutions, with more than USD 14 trillion in AUMs, and top global and FEM executives from a record 177 companies.

At the end of the year, EFG Hermes hosted the fourth annual Egypt Day Summit in Cairo. The conference saw 27 investors from 22 financial institutions representing USD 5.5 trillion in AUM meet with key government officials and CEOs from Egypt’s top listed companies to discuss Egypt’s economic and business outlook heading into the new decade.

Key Financial Highlights 2019

EFG Hermes Securities Brokerage revenues rose 16% y-o-y to EGP 1.2 billion in 2019, supported by strong revenues generated from Saudi Arabia, Kuwait, and Structured Products operations. Average daily commissions also reported strong growth compared to the previous year, up 18.9% compared to 2018 on the back of strong commissions generated by Egypt, frontier markets, and Saudi Arabia.

Awards

Heading into 2019, EFG Hermes Securities Brokerage will continue delivering on its growth strategy with further expansion of its geographical footprint into new, high-potential Frontier Emerging Markets while continuing to develop and diversify its product offering. The division is confident in a recovery of volumes and sentiment across the wider MENA region during 2019 and expects to capture a large share of new foreign inflows resulting from the six anticipated index inclusions or upgrades between the FTSE and MSCI expected for 2019.

Awards

Outstanding results throughout the year were recognized by numerous awarding bodies, with the division having received numerous accolades:

• Best Equity House in Egypt – EMEA Finance African Banking Awards

• Best Broker in Egypt – EMEA Finance African Banking Awards

• Best Equity House – EMEA Finance Middle East Banking Awards

• Broker of the Year in Egypt, Kuwait and UAE – Euromoney’s Global Investor Division

• International Broker of the Year – Euromoney’s Global Investor Division