“At the right price there should be plenty of appetite for any Egyptian IPO,” said Hasnain Malik, a strategist at Tellimer in Dubai. However, he said that, in general, foreign institutional investors are more likely to go for IPOs out of the private sector, whereas sovereign wealth funds will be more interested in government-related enterprises.

“This is because, for sovereign wealth, the concern over whether their interests as a minority investor are subordinated to those of the government is outweighed by their geopolitical interest in the overall country,” he said.

The benchmark EGX 30 Index has been on a bullish run, rising over 100% in local currency terms from its July low, and is the third-best performing benchmark globally this year. It jumped 3.9% on Thursday, extending gains to a fifth day, and closing at the highest since May 2018.

Eoin Treacy's view

The Gulf War was a transformative event for India. When Iraq invaded Kuwait remittances abruptly stopped and the Indian government was presented with a dilemma. They chose economic reform and capitalism and the rest is history. The Nifty Index is up 3077% since 1991 for an annualised 9.53% gain. That is almost identical to the S&P500’s 9.99% 32-year annualised performance on a constant currency basis.  

Both Egypt and Pakistan have been delivered the same message. Saudi Arabia and Abu Dhabi are no longer willing to write blank cheques to ensure stability. Instead, they view sound economic governance as the only route to political stability. A decade on from the Arab Spring, the message is clear. Governance has to improve or governments will fall. That is going to be a painful transition for countries that historically took GCC assistance for granted.

However, the upside from the perspective of a long-term investor is clear. The only question is where the bottom is. Egyptian inflation is running at 25.8% and short-term rates are around 20% so there is still scope for additional rate hikes. Selling state-owned assets was a precondition from the GCC before they would lend assistance.
The VanEck Egypt ETF is firming from the region of its lows.

Pakistan’s inflation is running at 27.55% and the overnight rate is at 17%. That suggests ample scope for further rate hikes.

The Global X MSCI Pakistan ETF firmed today but remains in a consistent downtrend overall.
The iShares MSCI Frontier and Select EM ETF has a 30% weighting in Vietnam. It is currently pulling back from the region of the 200-day MA.