You will be forgiven for having missed it: Amid the stark headlines about the subprime fallout earlier this week, a London-based emerging markets investor was drawing attention to Egypt.
Charlemagne Capital, a quoted company on London’s Alternative Investment Market, explained why it wants to issue shares for its recently launched Magna Africa Fund from September 24 onwards. The move will allow retail investors in the UK to trade in the fund for the first time. Subscribers will buy into commodities, raw materials – and real estate in Egypt.
The rationale seems straight forward: “The increasing economic maturity of the region [South Africa and Nigeria included] and an expanding middle class demonstrate growing consumer participation,” Charlemagne told potential investors.
By coincidence, this month also saw the publication of a report by the Organisation for Economic Cooperation and Development (OECD) entitled “Investment Policy Review of Egypt 2007.” It highlights rapid growth in foreign direct investment into Egypt, noting that it rose twelve-fold between 2001 and 2006 from $500 million to $6.1 billion as the country diversified away from oil and gas. According to Mahmoud Mohieldin, the Egyptian minister for investment, this figure will reach €10 billion in 2007.
And it seems Egypt’s quoted property sector has been reflecting the increased interest. According to ratings agency Standard & Poor’s, the shares of Egyptian real estate companies collectively rose by 101 percent in the second quarter this year. By contrast, European stocks fell 10 percent during the period.
Sure enough, foreign private equity real estate firms are beginning to sit up and take notice. In June, at Private Equity Real Estate’s annual forum in London, Morgan Stanley’s global co-head of real estate funds, John Carrafiell, said Egypt was a market to watch. Meanwhile Equity International, the emerging markets investment firm run by Sam Zell which closed its third real estate vehicle on $300 million in January, has already made inroads into the country.
Over the summer, Kuwait-based Global Investment House was reportedly preparing a $300 million, Shariah-compliant real estate development fund that will target North Africa including Egypt. And this month, Egyptian investment bank Naeem Holding revealed plans for $300 million worth of funds to invest in Egyptian and regional property markets. One will invest in Egypt’s Smart Village, an office park in a Cairo suburb. According to Ahmed Naim Badr, chief executive of the bank, land prices around the capital of Cairo have doubled over the past year.
Another important development in Egypt, which has a population of 80 million, has been a recent law to allow the creation mortgage finance companies for the first time. Up until now, most of the residential developments in Cairo have been upmarket ones, but opening up mortgage finance to the middle classes is expected to expand opportunities. Likewise, recent changes to Egyptian law allowing funds to buy property in addition to equities are also expected to boost investment.
Given the turmoil in financial markets, London, Tokyo and New York may not feel like the best places to be right now. Emerging markets on the other hand could be an attractive—if risky—alternative. If you are looking for a quick getaway, maybe it’s time to go see the pyramids.