Christopher Palmer, who manages $6 billion as head of global emerging markets at Gartmore Investment Management Ltd. in London, comments on demonstrations in Egypt. He spoke in a telephone interview on Feb. 2.
“In terms of the region, Egypt would be a preferred market for us simply because it’s the most open. We can buy shares directly; they have relatively easy custody practices and are investor friendly.”
The country is “recognized in emerging markets index. If a way forward emerges which includes an important degree of political reform I would say Egypt’s attractiveness will increase over time.
“Markets are more attractive now in the sense the prices have come down. Investors see an entry point that is more attractive, provided the parties enter into agreement in the coming days. We’ve been investors in Egypt at higher levels in the past and maintain an open mind about investing in Egypt because it has so much potential.
“If risk averse investors feel they can be somewhere else, they will sell. That’s not based on informed view, but rather nervous investors that want to get out. If Egypt can turn the corner over the next few days with meaningful dialogue and can move toward an established election date where parties agree to take part in fair elections, and accept a degree of international participation for those elections, the country will come out of this alright.”
On long-term benefit of crisis:
“In an historical context, it’s better in effect that the Egyptian crisis is happening now. Without taking away from the strides that have been made in MENA with the establishment of stock markets to cater to foreign fixed-income and equity investors, the stock flows remain subdued when you look at the vast amount of money pouring into ETF flows into the global emerging market countries. MENA is not yet a large part of the overall emerging market story.”
“Only after political reforms in Latin America was the region really able to elevate itself in the eyes of foreign investors. They then started receiving an extremely large amount in terms of foreign portfolios and investment.
“We’re not even close to that point in the MENA region because those political reforms haven’t happened yet. So this political instability is not the end of investing in MENA. However, investors are going to have to accept the inevitability of change. It is possible for the entire block of countries, one at a time, and at their own pace, to demand change, and for governments to realize they can’t grow and adapt to the changed world with their existing political and economic systems.
“Flexibility and competitiveness are crucial to success in today’s global marketplace and regional regimes will have to stop and consider just how hard they are working to achieve that on behalf of their growing, young populations.”