Bucking the Trend
The question facing investors in February was what it will take to change the stubborn trends of global financial markets. Emerging market stocks, including those in Africa and the Caribbean, are trying to stabilize in the wake of government efforts to increase money supply and boost lending. Investors are beginning to be more risk averse despite the lingering global recession. They are taking advantage of discounted stocks to increase their portfolios in African and Caribbean markets.
In Africa, Ghana’s All-Share Index, up 31 percent since Jan. 1, is now the world’s best-performing stock benchmark. Botswana’s main index, which includes 16 companies valued at about $3.5 billion, declined 3.7 percent this year. Standard Bank, the biggest stock in the index, has gained 1.3 percent. South Africa’s FTSE/JSE All-Share Index dropped 4.4 percent in January, its first monthly decline in three months.
In the Caribbean, major indices in Jamaica, Barbados and Trinidad slipped about 1 percent only, compared to an 8.4 percent loss for the broader world market in January. The Network Journal’s Caribbean Index managed to keep losses at minimum even as commodity prices came off in Trinidad and tourism suffered in Jamaica and Barbados. As a result, Ghana, Botswana, Jamaica and Trinidad and Tobago will gain the so-called “MSCI frontier market” status by May 2009, which means they will be tracked for the first time by MSCI Barra, the indices publisher owned by Wall Street bank Morgan Stanley.
But some markets aren’t doing so well. Nigeria’s main index slumped 31 percent in January, the world’s biggest decline, extending last year’s 46 percent drop, as falling oil prices weakened the economy of Africa’s largest oil exporter. Egypt’s benchmark index, the CASE 30 Index, has declined 26 percent since Jan. 1, after a 56 percent drop for 2008, as international investors exited riskier emerging-market assets.
The outlook for the rest of the year is still murky. Dependence on gas revenues could leave Trinidad’s economy vulnerable to the volatility of the petroleum marketplace. Slower economic growth is likely to weigh down on investors in Africa and the Caribbean, but weaker currencies would still be able to attract tourist dollars.
In fact, tourism is expected to be Africa’s bright spot also, following the inauguration of President Barack Obama. Africa Travel Association, a travel trade group, reports a surge in bookings to Africa. “All over Africa, we can see how excited everyone is about President Obama’s connection to the continent,” says Edward Bergman, ATA’s executive director.