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EFG Hermes Frontier
In 2020, EFG Hermes’ Frontier division capitalized on the solid base it built over the last three years since its launch to effectively and swiftly navigate hurdles posed by the COVID-19 pandemic across its footprint. We continued to hold on to our robust positioning across our FEM market base, relying heavily on the track record the team has worked diligently to build and continues to build even through region-wide lockdowns and having to work remotely during the peak of the crisis.
FEM economies faced multiple challenges over 2020, including oil price collapse in March, nationwide lockdowns that significantly impacted economic activity, and global dwindling in investor sentiment that impacted foreign portfolio flows. COVID-19 vaccine advancement has driven optimism back into FEMs, with the year ending on an optimistic note as domestic liquidity shored back into key markets, which EFG Hermes Frontier was poised to capitalize on, particularly with increased activity by local investors in Nigeria, Kenya, and Pakistan.
Despite these generally volatile market dynamics, EFG Hermes Frontier continues to strengthen its foothold across its key markets in Sub-Saharan Africa and South and Southeast Asia, increasing domestic penetration with local accounts and continuing to deliver outstanding research products thanks primarily to the strength and stability of the team. EFG Hermes retained all members of staff during the year, allowing it to come out of the year as resilient as ever. The success of the team allowed the division to garner several accolades, including being named the Top Frontier Research House on the Institutional Investor 2020 poll, with analysts nabbing the top two and three spots in terms of Frontier research analysts.
Sub-Saharan Africa
In Kenya, the division reported a second year of outstanding results. EFG Hermes now stands as the top-ranked brokerage player in the country just three years after entering the market with a 51.6% market share, significantly outpacing all other players in the country. In 2020, the division deployed a calculated strategy to expand its retail and high net worth investor base in Kenya by leveraging the group’s existing EFG Hermes One application. Aiming to launch in 2021, the extension of the application in the market would be the first of its kind in Kenya. This would not only firmly establish the Firm’s positioning in the country, but allow it to replicate the trading application’s success in other frontier markets.
In Nigeria, EFG Hermes leveraged the significant strides taken in 2019, which were anchored in EFG Hermes’ expertise and Primera Africa’s on-the-ground presence in the country, to reinforce its standing and traction with domestic and foreign institutional investors alike. To date, the Firm stands as the second leading broker in the country with 19.8% market share. The division has been mandated to conduct numerous investment banking transactions in Nigeria that were delayed due to COVID-19 and is currently exploring avenues to establish a fixed income trading desk in the market.
South and Southeast Asia
In 2019, EFG Hermes partnered with Asia Commercial Bank Securities (ACBS) of Vietnam, giving clients access and intelligence to trade on the Hanoi Stock Exchange (HNX), the Ho Chi Minh City Exchange, and UPCOM. The Firm increased its market share of foreign inflows this year as it worked to expand its reach in one of Asia’s most compelling capital markets despite being the only non-local investment bank operating in the country.
Following an extensive restructuring program for its Pakistani operations in 2019 in response to macro and political challenges, 2020 saw the market turn around once COVID-related lockdown restrictions were lifted. Volumes soared toward the end of the year driven by high-net-worth and retail investors, a turnaround the Firm was able to capitalize on and establish its presence further within the domestic equity franchise in Pakistan.
2021 Outlook
The division remains optimistic about its FEM strategy in 2021 as several indicators point to an FEM pickup for the year. Foreign inflows were already being seen toward the end of 2019, a trend we expect to continue into the FEM asset class and which EFG Hermes Frontier is poised to reap the benefits of. We expect to continue to see domestic yields come under pressure, but for domestic institutional as well as high-net-worth and retail investors to continue to be quite active across our footprint.
In 2021, we plan to further consolidate the base we have built over the last several years. As a post vaccine world and what that means for markets begins to take form, markets are expected to normalize, and deals in our pipeline that were postponed should come to fruition. We will continue our push in particular into Asian markets, exploring opportunities in Vietnam and Indonesia through strategic partnerships. We also expect to lay the groundwork to launch new products across our FEM universe, including Fixed Income Desks, DCM products, and others that will drive growth for the division and the Firm in the year to come.