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Tuesday, 14 June 2022

We like debt and insurance, but hate stocks

The Financial Regulatory Authority is out with its quarterly report (pdf) detailing the state of capital markets in 1Q2022, and it was a mixed bag. Activity on the bourse and securitized bond issuances fell, while all other capital market activities saw an uptick in the first three months of the year.

The general consensus makes sense: Forms of financing and debt relying on steady, predictable cashflows and income rule in this era of instability, while speculative assets are seeing outflows. The report covers everything from ins. activity to different forms of financing, such as mortgage financing, factoring, consumer finance, and leasing. We break down the key figures below:

Share issuances were down: The number shares in new companies fell 34% y-o-y, while shares for capital increases saw a decline in value of 6%. On the upside, the EGX30’s market cap rose 19.9% y-o-y during the quarter to EGP 431.6 bn. Total turnover on the EGX (including shares and bonds) rose some 85.1% y-o-y to EGP 447.2 bn, with local investors accounting for 72.7% of the quarter’s trading activity. International investors accounted for 17.9% of trading, while regional investors represented 9.4% of the quarter’s trading activity.

Securitized bond issuances fell 6% y-o-y during the first quarter: By our count, these issuances include Corplease’s EGP 2.4 bn bond issuance (which will be disbursed in four tranches over 13 months, a EGP 170 mn short-term securitized bond sale from Premium Card, GB Auto’s EGP 4.3 bn securitized bond sale, the sale of the first EGP 300 mn tranche from Madinet Nasr Housing’s three-year EGP 3 bn securitization program, a EGP 794 mn issuance from Misr Italia Properties as part of its EGP 2.5 bn securitization program, UE Finance’s EGP 1.2 bn securitized bond issuance, and the first securitized bond sale from Al Ahly Leasing and Factoring Company worth EGP 747.5 mn.

Leasing + factoring + ins. activity had a healthy quarter: Leasing companies closed 11.7% more transactions during the quarter, with a 32.4% increase in the size of contracts. The value of factored securities also jumped 90.8% y-o-y to EGP 6.62 bn. Meanwhile, ins. activity rose in 1Q 2022, with total property ins. payments to ins. providers rising 9.8% y-o-y to EGP 13.21 bn, while total property ins. payouts from providers to beneficiaries rose 23.6% y-o-y to EGP 7.51 bn.

Mortgage financing was also on the up: The number of mortgage financing providers rose 75.8% y-o-y to 2,577, with a 91.3% increase in residential mortgage financing providers offsetting a 69.0% y-o-y drop in providers for non-residential purposes. The total amount of financing doled out in 1Q 2022 rose 103.5% y-o-y to EGP 3.47 bn.

Meanwhile, everyone and their mother is getting in on microfinancing: Some 36 new companies obtained microfinancing licenses during the first quarter of the year, according to the report. We’re also keeping an eye on EGX-listed Edita’s plans to establish a micro lender and e-Finance’s digital payments arm Khales, which applied for a microfinancing license earlier this year.

Consumer finance, by the numbers: Consumer financing hit around EGP 6.8 bn during the quarter, according to the report, which does not provide comparative figures for the same quarter last year. However, the FRA suggests that this number will increase moving forward as the government works to support local manufacturing and relying on locally-produced goods. Electronics and appliances accounted for the bulk (45.8%) of consumer finance activity, followed by cars and other automotive purchases (32.3%). Contact Financial held the biggest share (34.8%) of the consumer finance market in 1Q 2022, followed by valU (31.4%), MNT-Halan (14.2%), Premium International (8.0%), and CI Capital’s consumer financing arm Souhoola (4.1%).

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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