Research

Overview

EFG Hermes’ Research team continues to lead the region in terms of quality and breadth of coverage. The team increased stock coverage to 263 equities across 24 markets at year-end 2018, up from 224 equities and 14 markets during the previous year with a total of 10 countries under macro coverage. EFG Hermes’ team of analysts now offers investors the broadest coverage of frontier emerging markets (FEM) equities and has deepened its macroeconomic, sector, and equity coverage of the key markets in the MENA region and beyond.

Operational Highlights of 2018

In recognition of the team’s extraordinary research efforts, EFG Hermes was in 2018, for the first time, named the top frontier markets research firm by Extel. This prestigious recognition of the Firm’s efforts comes just two years into EFG Hermes’ drive to expand beyond the MENA region and into frontier emerging markets. Nine of the Firm’s 20 analysts were recognized in the top 20 of Extel’s 2018 MENA research poll, making EFG Hermes the second-ranked firm overall and the top-ranked MENA-headquartered firm in the poll. 2018 also saw EFG Hermes named the Top Africa (Ex. South Africa) Equities House at the Financial Mail Top Analyst Awards, demonstrating the strength of its African footprint.

For EFG Hermes Research, 2018 was about Frontier markets expansion. The year saw the department initiate on equities in Georgia (2), Bangladesh (7), Mauritius (2), Uganda (2), Rwanda, (1) and Botswana (1), which added to the research coverage portfolio. Meanwhile, EFG Hermes Research deepened its coverage of the MENA and FEM markets already under its purview, initiating coverage of new equities in Egypt (5), Kuwait (2), Saudi Arabia (1), the UAE (3), Nigeria (5), Kenya (2), Pakistan (1), and Vietnam (3). The Division has also enhanced its on-the-ground presence, boosting its ability to produce market-leading and differentiated research products. The FEM expansion has seen the division grow its team from 46 analysts located in 6 countries in 2017 to 52 located in 8 countries at year-end 2018, with new recruitment taking place in Pakistan given its growing importance in FEM research.

The team is constantly evolving research products, whether to reflect the rise in passive money in the region and the subsequent impact on both markets and equities alike, or changing client focus – the team has seen rising interest in education and information technology across its coverage. Education and IT sector equities, on which the division initiated coverage in 2018, raised the total sectors covered by the division to 38.

The breadth of coverage enables EFG Hermes Research to provide investors with deep and comprehensive analysis that facilitates comparative evaluations across numerous markets and sectors, distinguishing EFG Hermes from its peers in the research segment. This has helped greatly in the face of MIFID II (Markets in Financial Instruments Directive), wherein the Sell-side have had to decouple research from brokerage commissions for European clients. As a result, the EFG Hermes research team has had to sell research on an account-by-account basis, and successfully negotiated over 50 contracts with clients to pay for EFG Hermes Research on an annual basis. The ability to maintain fruitful direct relationships with research clients was reinforced in 2018 through the implementation of the IPREO system. Launched in the previous year in response to MIFID, IPREO is a customer relationship management system that allows EFG Hermes to track client interactions from a regulatory standpoint while enhancing the Research team’s ability to analyze client data and tailor products to meet their needs.

In 2018, EFG Hermes Research in its mission to optimize the client experience, further enhanced the research portal. This digital portal provides investors with the division’s award-winning analysts’ insights at the touch of their fingertips through a mobile-friendly interface that allows them to personalize their research experience. The platform allows all clients to manage their mailing preferences, save and archive reports they wish to consult later and view their navigation history, as well as providing access to a research library that now encompasses all historical news, reports, and commentaries.

New Products in 2018

In 2018, EFG Hermes Research launched Egypt One, a new retail research product that delivers a daily report summarizing what we expect to happen in the market and which equities we believe will outperform in the short term. The research included in Egypt One is largely retail-oriented and complements the team’s previously communicated strategy to gear more of its products to retail investors. This strategy has seen the team increase coverage of small-cap stocks and launch a retail-specific web portal that provides the broadest and most in-depth coverage compared to any research house in the region.

2019 Outlook

The year ahead will see a number of important developments in MENA markets, given Saudi Arabia’s inclusion into the MSCI Emerging Markets index and its promotion to Emerging Market status by the FTSE Russell Index. With a large inflow of passive funds expected into Saudi Arabia and other MENA markets over the coming months, client demand for quality market and equities research is expected to come to the forefront. The research management team has worked hard to position EFG Hermes as a prime beneficiary of this increase in interest and activity, with a significant increase in Saudi Arabian coverage.

EFG Hermes Research will continue to expand its geographic and sector coverage, focused on deepening its coverage in MENA and expanding coverage into Sri Lanka, Ghana, and other SSA countries. Two years into EFG Hermes’ expansion into frontier emerging markets, its fundamental research approach and commitment to quality over quantity, plus its on-the-ground presence has meant that the division has differentiated itself from competitors. In addition, EFG Hermes Research team’s broader coverage across FEM (MENA, Africa, Asian frontier markets) has been a boon as most other research houses have a narrower focus (i.e. one of MENA, Africa, Frontier Asia, but not all three markets).