Overview
As the leading brokerage house in the MENA region, EFG Hermes Securities Brokerage offers its growing client base a range of diverse products and services and an unparalleled coverage of more than 75 MENA and frontier emerging markets. Despite the challenges of the COVID-19 pandemic, which impacted all sectors around the world, the division continued to hold an on-the-ground presence in Egypt, Kuwait, the UAE, Saudi Arabia, Oman, Jordan, Pakistan, Kenya, Nigeria, and Bangladesh, with offices in the UK and the US. The division’s growing client base ranges from individual retail investors to some of the most prominent institutional investors and high-net-worth-individuals in the region and the world. EFG Hermes Securities Brokerage’s all-encompassing portfolio of products and services is supported by the Firm’s award-winning Research division, which provides clients with real-time market intelligence and unique insights, and the division’s online trading platform, which allows for instant market access from desktops, laptops, and mobile phones.
Operational Highlights of 2020
The past year saw unprecedented conditions brought on by the pandemic, but equity markets continued to perform relatively well, allowing EFG Hermes Securities Brokerage to reap the benefits of the already solid positioning it holds in the markets in which it operates, benefiting from increased volumes brought on by the pandemic induced volatility.
EFG Hermes Securities Brokerage reported another year of solid operational results, despite ongoing global challenges brought on by the COVID-19 pandemic. Markets continued to improve as the year progressed, on the back of a relative resumption of economic activities. Higher executions in Kuwait and frontier markets were overshadowed by lower executions in Saudi Arabia, Qatar, Egypt, and our Structured Products Desk, leading executions to be flat on a Y-o-Y basis, declining by 1%. Brokerage revenues fell 17% Y-o-Y to EGP 1 billion, mainly on lower revenues generated by MENA markets, with the exception of Kuwait and Egypt, lower revenues generated by frontier markets, with the exception of Kenya and Pakistan, losses incurred by the Fixed Income Desk in 1Q20, and lower revenues generated by the Structured Products Desk. In terms of pure commissions booked in different markets, Egypt remained the top contributor to Brokerage commissions, at 25.6%. Frontier markets recorded a 14.8% contribution, while UAE markets (Dubai, Abu Dhabi, and Nasdaq Dubai) stood at 13.1% and Kuwait at 19.8%.
Egypt’s equity market picked up towards year-end, following a year of government measures to cushion the economic impact of the COVID-19 pandemic. EFG Hermes maintained its number one ranking on the EGX, with the Firm’s market share at 36.40% in 2020. Foreign participation came in at 19.8%, with EFG Hermes successfully capturing 49.0% of foreign institutional flows.
In the UAE, the Dubai market continued to gain ground from the second half of the year, allowing the Firm to retain its number one ranking on the DFM, with a market share of 32.5%. On the ADX, EFG Hermes’ market share stood at 27.6%, securing a second-place finish.
In Kuwait, trading activity picked up toward the end of the year, especially following Kuwait’s upgrade to EM status by MSCI inclusion in November. This allowed the Firm to hit the highest number of executions ever traded by the Brokerage division since its inception, at USD 2.7 billion. The division continued to rank first in the market, with a market share of 34.1% in 2020 compared to 33.7% in 2019, capturing the lion’s share of foreign institutional flows during the year.
Supported by local investors, the Tadawul All Share Index continued its upwards trajectory, following the decline in the first half of the year, allowing the firm to capitalize on this momentum and capture significant inflows from all tiers of investors. The Firm’s market share came in at 2.22%, ranking fourth among brokerage firms not linked to commercial banks.
EFG Hermes Oman’s market share climbed to 24.5%, with the Firm coming in third place. Foreign participation stood at 12.3% of market turnover, with EFG Hermes capturing 19.8%.
Brokerage Rankings (percent of total market executions)
|
|
FY20 |
FY19 |
|||
|
|
Market Share |
|
Rank |
Market Share |
Rank |
|
Egypt |
36.4% |
v |
1st |
47.8% |
1st |
|
UAE – DFM |
32.5% |
v |
1st |
33.5% |
1st |
|
UAE – ADX |
27.6% |
v |
2nd |
39.1% |
1st |
|
UAE – NASDAQ Dubai |
58.3% |
v |
1st |
65.9% |
1st |
|
Kuwait |
34.1% |
^ |
1st |
33.7% |
1st |
|
Kenya |
51.6% |
^ |
1st |
34.5% |
2nd |
|
Nigeria |
19.8% |
v |
2nd |
26.2% |
3rd |
|
Oman |
24.5% |
^ |
3rd |
18.4% |
4th |
|
KSA |
2.2% |
v |
4th* |
6.1% |
5th |
|
Jordan |
6.0% |
v |
13th |
8.3% |
6th |
|
Pakistan |
3.8% |
|
n/a |
6.2% |
n/a |
Frontier Emerging Markets
Despite generally challenging market dynamics, EFG Hermes Frontier continued to hold its position in the territories it operates. As such, EFG Hermes Frontier continued to noticeably contribute to the Group’s 2020 financial performance.
In Kenya, inflows from retail investors buoyed the market in 2020. As such, the division reported a second year of strong performance, with EFG Hermes now the top-ranked brokerage player in the country with a 51.6% market share, significantly outpacing all other players in the country.
Meanwhile in Nigeria, EFG Hermes leveraged the strides made the year previous to cement its position with both retail and foreign institutional investors. To date, the Firm stands as the second leading broker in the country with a 19.8% market share.
The Pakistani market witnessed a challenging year due to the COVID-19 pandemic but ended the year on a strong note following the resumption of normal business operations after the lifting of the country’s lockdown measures, as well as several positive macro and political developments. EFG Hermes Pakistan’s market share came in at 3.8%, capitalizing on increased inflows from high-net-worth and retail investors.
In Vietnam, the market continued to recover from its slump during the start of the year. The Firm boosted its market share of foreign inflows in 2020 as a result and continued to expand its reach in the country as one of its key strategy planks for growth in Southeast Asia. As such, the Firm retained 0.05% market share during the year.
EFG Hermes One
Launched in 2017 in partnership with Saxo Bank, EFG Hermes One grants users one-click access to multiple global markets, seamlessly integrates the SaxoTraderGo platform to expand access and capabilities and provides access to EFG Hermes’ award-winning research products. The innovative online platform enables local and regional investors to explore new opportunities in global capital markets and trade multiple asset classes from a single account from anywhere in the world.
One of the main highlights of the year was the performance of EFG Hermes’ Bahrain subsidiary, OLT Investments International. The Firm’s online platform in collaboration with Saxo Bank has managed to increase its client base and assets under platform threefold during 2020 compared to 2019, putting the Firm amongst the significant players in the region in this domain. The Firm was well placed to capture the new business initiated as a result of the increased interest in global markets due to the volatility seen last year. During the year, the success of EFG Hermes One spurred the Firm’s interest in replicating the application to suit the Kenyan market, with plans already laid out to that effect set out for 2021.
Structured Products
2020 saw EFG Hermes Securities Brokerage’s Structured Product Desk’s revenues decline 35% to EGP 59 million. The Structured Product Desk was launched in 2016 as part of the Firm’s strategy to grow its capital market business and deliver product diversity to the franchise.
Unique Corporate Access
In light of the unprecedented circumstances imposed by the COVID-19 pandemic, 2020 saw EFG Hermes cement its commitment to connect global investors with opportunities across its FEM footprint despite the difficult circumstances through launching a new conference format. The Firm held two successful investor conferences, virtually for the first time, in place of the flagship One on One Conference.
In June, the first Virtual Investor Conference spanned three weeks, and facilitated more than 6,500 meetings, bringing together executives from 72 companies and 14 countries, with 480 institutional investors representing 160 institutions managing assets in excess of USD 15 trillion. The second Virtual Investor Conference in September saw an even greater and more diverse turnout, with 157 companies from 25 countries around the world holding direct meetings with more than 650 institutional investors from 240 global institutions managing assets more than USD 17 trillion.
Key Financial Highlights 2020
EFG Hermes Securities Brokerage revenues fell 17% y-o-y to EGP 1 billion in 2020, on lower revenues generated by various products and across the Firm’s jurisdictions.
Awards
The team’s success has garnered recognition from numerous international ranking institutions and awarding bodies this year, including Best Brokerage Services by MENA FM and Africa Global Funds; Best Broker in Egypt, Kenya, and Nigeria by the EMEA Finance African Banking Awards; Best Broker in the Middle East, UAE, KSA, Kuwait, and Oman by the EMA Finance Middle East Banking Awards; and Broker of the Year in KSA, Oman, Egypt, and Kuwait by Global Investor Group MENA Awards.
Outlook
With FEM markets pegged for market recovery and an uptick in inflows in the year to come, the team will continue to capitalize on the significant achievements made during 2020. It will work to grow its foothold in its primary MENA markets and build on the successes achieved in Sub-Saharan Africa to build out an East and West financial hub through its Kenya and Nigeria outposts. At the same time, it will work to grow its standing in Southeast Asia, building on the tremendous success in Pakistan and Vietnam as well as stellar execution capabilities across the region. All in all, the division will continue to launch new products, hone its service offering, and forge partnerships that will continue to place it as a broker of choice throughout its footprint.