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Exotix Planning Africa Office After Equity Hires From RenCap

Exotix Ltd., the London-based investment bank boosting its African equities team, plans to open its first office on the continent in the next six months.

Equity research will focus on financial services, consumer stocks, telecommunications and industrial companies, Ali Khalpey, head of African equities, said yesterday in an interview in Johannesburg. Khalpey, 39, ruled out the South African city, Nairobi and Lagos as locations for the first office, without giving more details on the plan.

Renaissance Capital and Standard Bank Group Ltd.’s securities unit are also expanding in Africa to tap into growth rates higher than those of developed markets. Exotix said last week it had hired Citigroup Inc.’s Kato Mukuru, Sruti Patel from Standard Bank and James Busch from RenCap to expand its Africa team. Khalpey, who joined Exotix from Moscow-based RenCap, also plans to add an oil and gas research analyst, he said.

“We’re believing in the growth story so volumes are where the opportunity comes in,” he said, adding that while equities remain attractive there is some pressure on profitability.

Companies will need to raise capital for infrastructure development, London-based Khalpey said, adding that Nigerian banks will have to come to the market in 18 to 24 months to fund projects.

Egypt has some “amazing companies,” he said. Countries like Tunisia, Algeria and Morocco are undiscovered and also have “world class companies that our clients can invest in.”

Compelling Case

Exotix’s equity unit offers sales, trading and structured transactions, according to its website. The firm, which began in 1999, started as a fixed-income specialist and provides debt capital services in sub-Saharan African countries, Khalpey said.

“The most exciting area of growth over the next decade will be in the emerging and frontier markets outside of the G20,” Phil Southwell, who became chief executive officer of Exotix earlier this year, said in a statement last week. “With the International Monetary Fund forecasting 5 percent real GDP growth in 2013 and 6 percent in 2014, the investment case for the region is compelling.”

In competitive African markets such as South Africa or Zimbabwe, Exotix may consider partnerships with local equity houses, Khalpey said.

“If there are domestic banks with strong relationships who don’t have the international distribution that we do, we’re happy to partner,” he said. “Let’s play to our strengths and have some of the pie.”

While Khalpey is focused on developing the equities offering in Africa, Exotix may consider expanding into countries including Pakistan, Bangladesh and Sri Lanka, he said.

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