Investors see opportunity in post-Mubarak Egypt
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The end of Hosni Mubarak's rule in Egypt on Friday should bring opportunities for investors as freer markets and increased commerce gradually take root in a country with 80 million people hungry to become part of the global economy.
Mubarak relinquished power to the military 18 days after an uprising led by a technologically savvy young population demanding jobs, freedoms and transparency.
Despite the political uncertainty of what lies ahead in the short-term, investors see the Egyptian 'White Revolution', as many citizens are calling it, an opportunity to grab market-share in the region's most populous country.
"There will be democracy and transparency and these changes will lead to more economic growth," said Larry 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 5 to 10 per cent of its $4.79 million portfolio.
Under the 30-year rule of Mubarak, Egypt had been a critical ally of the United States and the main stability force in the Middle East. But now that his rule is over, many worry that a power vacuum could lead to a new regime that will oppose Western capitalism and be antagonistic toward Israel, the main U.S. ally in the region.
The outcome is yet to be seen. But government officials and investors in general, as well as the majority of Egyptians, 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. If that government ends up being democratic in nature, then you could certainly see some improvement," said Bryant Evans, investment advisor 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 and free markets as the best form of insurance for their investments.
"When you have less than, say, 10 per cent of the population with checking accounts, there is potential for growth," said 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 institutionalize that economy, then people will start securitizing their debts, able to borrow more, buy more. So there is a big domino effect."
'NOTHING HAS CHANGED MY VIEW'
Egyptian assets make up just a fraction of global emerging market funds, and the economy accounts for just about 0.3 per cent of the MSCI emerging market index.
The Van Eck Market Vectors Egypt index exchange-traded fund rallied after Mubarak's resignation and set a daily volume record. It was last up 4.8 per cent at $18.66.
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