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21st AUGUST 2011 - Vol.XXXIV No.154

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BUSINESS NEWS

INVESTORS SEE WHITE REVOLUTION IN EGYPT


Posted on Sunday, February 13, 2011

NEW YORK: The end of Hosni Mubarak's rule in Egypt should bring opportunities for investors as freer mark increased commerce gradually take root in a country with 80 million people hungry to become part of th economy.

Mubarak relinquished power to the military 18 days after an uprising led by a technologically savvy young po demanding jobs, freedoms and transparency.

Despite the political uncertainty of what lies ahead in the short-term, investors see the Egyptian "White Rev as many citizens are calling it, an opportunity to grab market-share in the region's most populous country.

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"There will be democracy and transparency and these changes will lead to more economic growth," sa Seruma, managing principal at Nile Capital Management. "It's a great opportunity to invest in Egypt." Prior to the revolution, Nile Capital's exposure to Egypt was five to 10 per cent of its $4.79m portfolio.

Now that Mubarak's rule is over, many worry that a power vacuum could lead to a new regime that will Western capitalism and be antagonistic toward Israel, the main US ally in the region.

The outcome is yet to be seen. But government officials and investors in general, as well as the majority of Eg

are hopeful for a more open government and market.

"I think investment in Egypt itself could increase, say, a year from now as a new government comes in government ends up being democratic in nature, then you could certainly see some improvement," said Evans, investment adviser and portfolio manager at Cozad Asset Management, in Champaign, Illinois. Even the most powerful and wealthy businessmen in Egypt have been beating the drums of democracy markets as the best form of insurance for their investments.

"When you have less than, say, 10pc of the population with checking accounts, there is potential for grow Karim Baghdady, managing director of Egyptian-based investment bank Beltone in New York.

"When you have a gray economy that is almost as large as the official GDP, if you are able to institutiona economy, then people will start securitising their debts, able to borrow more, buy more. So there is a big effect."

Egyptian assets make up just a fraction of global emerging market funds, and the economy accounts for ju 0.3pc of the MSCI emerging market index.

The Van Eck Market Vectors Egypt index exchange-traded fund rallied after Mubarak's resignation and se volume record. It was last up 4.8pc at $18.66.

Overall, emerging market equities have come under selling pressure due not only to Egypt's political ructi also on profit-taking from two-and-a-half-year high benchmark indices.

Investors have pulled a net $6.27 billion from emerging market equity funds in the last three weeks, according from Lipper, a Thomson Reuters service.

However, when factoring the market price movements on the stocks, the assets under management in US-d funds are down $10.92bn, or 5.6pc since the week ended on January 26. Yet this is seen by some d investors as an opportunity.

In the fixed income space, one fund manager said Egypt's US dollar-denominated sovereign bonds have reco good portion of lost ground, but is still not convinced the debt issues are a bargain.

"I think people realise there was a panic in the bonds and short positions had to be covered, while a potentia peaceful resolution to the protests, with limited escalation of violence, added to some relief buying," said Je co-head of emerging market debt portfolios at hedge fund Gramercy in Greenwich, Connecticut.

The Egyptian pound had been falling steadily since political protests broke out. By Thursday, it traded at 5.88 US dollar, marginally lower than Wednesday's close of 5.8775 but stronger than the six-year low of 5.960 before the central bank intervention on Tuesday.

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