EGX 30 Ends This Week 1.54% Higher, Shrugs Off Hermes Deal Failure

Despite the fact that the planned takeover of Egypt’s largest investment bank by Qatar’s QInvest LLC has been scrapped, the Egyptian Exchange (EGX) has managed to end this week posting gains of EGP 3.1 billion backed by local buyers.

The capital market has reached to EGP 358.612 billion during Thursday’s closing session.

The EGX indices ended Thursday in green notes.

Egypt’s benchmark index EGX30 surged by 1.54% to close at 5276.62 p; while the EGX20, it also advanced by 0.65% to end at 6025.17 p.

Meanwhile, the mid- and small-cap index, the EGX70 rose by 0.56% to conclude at 451.31 p.  Price index EGX100 climbed by 1.04% to finish 753.41 p.

During closing, the trading volume hit 49.406 million securities, less than Tuesday’s 49.940 million securities, representing a decrease of 534 securities. For the traded value, it reached EGP 275.056 million, exchanged through 11.724 thousand transactions.

This was after trading in 155 listed securities; 18 declined, 107 advanced; while 30 keeping their previous levels.

Egyptians’ buying transactions have backed EGX’s gains as they were net buyers seizing 69.53% of the total markets, with a net equity of EGP 19.840 million, excluding the deals.

Meanwhile, Arabs and the non-Arab foreigners were net sellers seizing 8.5% and 21.97% respectively, of the total markets, with a net equity of EGP 1.882 million and EGP 17.958 million excluding the deals.

Hermes’ Planning JV Agreement With QInvest Terminates; Shares Dive:

EFG-Hermes Holding (HRHO.CA) fell the most in more than five months on Egyptian regulatory turning down the planned takeover of Egypt’s largest investment bank by QInvest LLC.

Shares of the Cairo-based company fell 1.71%, the most since Nov. 25, to EGP 9.78.

Egypt’s financial regulator – the Egyptian Financial Supervisory Authority (EFSA) announced on Thursday that it has rejected the joint venture agreement between EFG-Hermes and Qatar’s QInvest LLC due to the limited expertise of QInvest that has not undertaken any activities since inception.

EFSA stated that the bidder – QInvest does not have sufficient expertise to own the units of EFG-Hermes Holding (HRHO.CA).

EFSA further confirmed that, out of its regulatory role of maintaining safety and stability of non-banking capital markets and protecting their dealers, and in light of the limited expertise of the bidding company that has not undertaken any activities since inception, it decided that the bidder does not have sufficient expertise to own the units of EFG-Hermes Holding; one of Egypt’s biggest investment banks.

On Wednesday afternoon, EFG Hermes and QInvest, Qatar’s leading investment bank, announced that the long-stop date for the satisfaction of the conditions precedent for their joint venture agreement to proceed had been reached without receiving the necessary regulatory approvals from Egypt’s financial regulator – the Egyptian Financial Supervisory Authority (EFSA). As a result of the long stop date being reached, the joint venture agreement will automatically terminate.

The parties received the necessary financial services regulatory approvals in all other markets in which the joint venture was initially to operate including Qatar, the United Arab Emirates, Saudi Arabia, and Jordan, among others. EFG Hermes and QInvest co-operated fully with all regulators, met all of their requirements and exercised the utmost diligence in addressing any regulatory requests in a timely and comprehensive manner.

EFG-Hermes Plans Asset Sales As Qatar Deal Fails

Consequently, EFG-Hermes Holding SAE said it will sell assets and cut costs after an agreement to create the largest Arab investment bank with Qatar’s QInvest LLC collapsed because of regulatory delays.

The Cairo and Doha-based banks said late yesterday the planned joint venture ended after they reached a 12-month deadline without approval from the Egyptian Financial Services Authority. EFG will sell “non-core” assets and return most of the cash to shareholders as it seeks to cut costs by 35 percent.

“It will be hard for QInvest to build an investment banking platform that the EFG deal could have offered,” Jaap Meijer, Dubai-based director of equity research at Arqaam Capital, said yesterday in a telephone interview. “EFG will now try to protect its bottom line, while QInvest will probably focus on its key strength, which is commercial banking.”