Interview: Ali Khalpey, head of equity capital markets at EFG-Hermes

We spoke to Ali Khalpey, head of equity capital markets at EFG-Hermes, about the key factors shaping the equity capital markets in the region.

What are the current trends in the equity markets and how are they affecting your core strategies?

We’ve had a very interesting two years in equity capital markets across the region. In addition, we’ve seen a large trend towards deepening financial markets, mainly with the issuance of a number of IPOs coming to the market.
We’ve also seen governments being very proactive in encouraging the development of both the UAE exchanges and Tadawul in Saudi Arabia. Oman has also been very proactive, a recent issuer, and even Kuwait, where we did a recent transaction on the Boursa Kuwait.

How do macroeconomic factors impact equity capital-raising activities?

The big picture for the region continues to be one of fiscal expansion. That trajectory has been most evident in what the UAE and the Saudi governments have been doing and it’s a very important pillar of keeping the growth story intact.
Economics, macroeconomics and geopolitics are very important drivers. Oil prices are incredibly important for the Saudi economy, where $70-80 per barrel is a very comfortable range for the Kingdom’s macro policies to be still effective and functioning. Below that, the economy would certainly see some tapering off in some of the giga-projects that the Kingdom has announced.

How would you classify your goals in your division for the next one to three years? How do you prioritize sectors or regions when it comes to your equity offerings?

Our goal in the next few years is to be the number one ECM house across the region. EFG has built a reputation across the GCC and MENA markets for providing capital market expertise. During the first half of this year, we were incredibly fortunate to be ranked number one.

We will continue to focus on bringing high-quality companies to the markets of Saudi Arabia, Kuwait, Oman, Egypt, Morocco and the UAE.

What are some challenges and opportunities we’re facing in the current global environment?

We have a lot of capital chasing very few opportunities in the region. If we look at the types of books that we build on IPOs, we’ve seen IPOs that are 160 or 170 times covered, which reflects a low number of opportunities. It’s also due to other capital markets not functioning, which is a key challenge.
We’ve seen a lot of capital chase small deals in Saudi Arabia and the UAE and that needs to change since it remains the biggest challenge.
Therefore, our goal for next year is to try and find larger deals that can cater to larger asset allocators, including big emerging market investors who have not been very active in our IPO market.

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