CEO of EFG Hermes Karim Awad said the conference is held amid the volatility facing financial markets around the world, the steep decline in oil prices, the conflicting fiscal policies in North America, Europe and Asia, and the slowdown in the growth of the Chinese economy.
He added that these factors constitute real challenges for the Middle East and North Africa during the current year. More than 450 investors from 227 global institutions that manage total assets of $10tr are participating in the summit, according to Awad.
He noted that 117 companies from 14 countries, including 32 Egyptian companies, are partaking in the conference, seeking answers regarding the impact of fluctuations that occur in the markets, especially oil, on the performance of Arab economies and companies.
He added that the low evaluation of stock markets in the region reflect the impact of falling oil prices since the second half of 2015 until early this year. This creates promising opportunities for investors interested in hedging by investing in stocks that will generate attractive revenues.
Awad pointed to the demand for hedging in the region, highlighting the existence of preliminary proposals run by the company. However, he noted that market fluctuations have obstructed initial public offerings (IPOs) of over $1bn. Meanwhile, he expected announced IPOs of $500m to attract large demand.
Awad explained that despite the low number of IPOs, many companies in the region have expressed serious intentions to sell shares on the stock exchanges as soon as the market stabilises. He predicted a wave of recovery and acquisitions in the upcoming period.
Awad expressed confidence that the conference will help promote IPOs in the region on the long term. He explained that the conference aims to provide a favourable climate for reviewing investment opportunities and exchanging ideas on the progress of the economic situation through a series of meetings between representatives of the executive management of the largest listed companies regionally, and a group of leading international investors and financial institutions around the world.
He noted that the Gulf has been hard-hit by the fall of oil prices; however, he noted that the Gulf Cooperation Council (GCC) states are aiming to diversify their income sources and launch austerity measures.
He added that current oil prices create many questions for global investment funds managers, noting that the diversification of the components of the fund may be one solution for this.
Awad said the United Arab Emirates is on track toward greater economic diversification, pointing out that Egypt’s 90-million population also contributes to economic diversification.
He added that privatisation is one of the main alternatives to the countries in the region, as part of the diversification of non-oil revenues. Moreover, he pointed to Saudi Arabia as one of the first countries to focus on privatisation, where it began fully privatising markets in 2004, while introducing Saudi Telecom shares on the stock exchange.
He noted that, in addition to the privatisation, Saudi Arabia has huge currency reserves, strengthening its position when borrowing from abroad. It also has the option of launching IPOs for state-owned companies. Moreover, Saudi Arabia also has a low debt to GDP ratio.
He noted that the Gulf’s reserves are large enough to support government spending and maintain the strength of their currencies, stressing that linking Gulf currencies to the US dollar is crucial at this moment.
Nonetheless, he pointed out that the lifting of sanctions on Iran and opening it up to the market links the UAE to international markets and affects the price of oil. He pointed out that, in addition to its strong banking system and diversity of the economy, the UAE has commercial ties with Iran.
However, he noted that GCC states are spared the burden of debts, so they can exploit a combination of international loans, IPOs, bond markets, and financing for energy projects, to hedge against the potential risks of linking their currencies to the US dollar, while continuing to spend on governments.