Morgan Stanley sees success for Egypt's first ETF

By Wael Gamal

CAIRO (Reuters) - Morgan Stanley expects Egypt's first ever exchange traded fund (ETF) for big cap equities to attract foreign institutional investors looking for safer havens in the global credit crisis as well as local investors.

"ETFs make it easier for foreigners, especially retailers, to invest in markets of which they don't have enough detailed knowledge," Deborah Fuhr, a Morgan Stanley managing director told Reuters in an interview late on Monday.

"I think decoupling between developed and emerging markets will continue as long as what is happening in the U.S. stays moderate," she added.

Egypt's bourse said earlier in the month it plans to launch an ETF based on the CASE 30 index .CASE30 in the coming months and stock and index futures and options next year with the aim of doubling the current daily trading volume of $150 million-$180 million over the next two years.

"It will be also good for local investors because it could be a way to equitize cash while holding a diversified exposure," Fuhr said.

Cairo's benchmark CASE 30 has risen more than five-fold since Egypt launched an economic reform drive in July 2004. Last year the CASE 30 rose 51.3 percent.

Morgan Stanley strategists are positive on emerging markets and recommend an overweight position of 4 percent.

"I don't see a specific concern for Egypt," Fuhr said adding Morgan Stanley was positive on Abu Dhabi, Qatar and Dubai.

Nevertheless, if the U.S slowdown turns to something serious, this would drag down all markets worldwide, Fuhr said.

An EFG-Hermes (HRHO.CA) (HRHOq.L) report in August said anecdotal evidence suggested that, as a percentage of the free float, the Egyptian market is the Arab market which is most heavily owned by Western institutions, making it more vulnerable to external shocks.

(Editing by Louise Ireland)