Out of the Blue
Shaken by unforeseen events in the past few months, African equity markets are picking up again and Caribbean markets continue to grow, boosted by economic recovery in the United States and Europe. Egypt’s stock exchange surged when it reopened late March as investors returned and began to reverse the 16 percent drop incurred just before the market closed on Jan. 27. Buyers were locals, however, as foreign investors worry about chaos in a country in political transition. Investors are also holding back from Tunisia, Libya, Morocco and Côte d’ Ivoire, where political unrest continues. Broader concerns about the market and general unease about Egypt’s direction pressured the local currency, the pound, although efforts by the caretaker government to organize elections for September boosted investor sentiment. But several blue chip stocks have yet to recover losses.
In South Africa, foreign investors remain enthusiastic despite wide swings in the country’s currency, the rand, since Japan’s earthquake in March. The rand saw a sharp pullback after the quake as riskier emerging market assets weakened, but bounced back as investors foresaw a muted impact from the disaster and even a potential benefit to South Africa from commodity exports and higher raw material prices once Japan starts rebuilding. Outside of Asia, South Africa has the largest export exposure to Japan among the emerging markets. Japan is one of the biggest destinations for South African commodity exports, whose prices have been rising lately. A high-powered South African delegation visited the United States in late March seeking more long-term investment and signaling that the country is open to investors setting up operations in areas like manufacturing, mining and agriculture. U.S. discount retailer Wal-Mart has already offered $2.4 billion for Massmart Holdings Ltd.
Kenya’s investment climate has improved after the 2008 violence and the government is optimistic about attracting $1.5 billion in private capital this year. Kenya needs to raise $3 billion every year to realize its vision of becoming a middle-income economy. In Jamaica, meanwhile, the tourism industry is rebounding, with visitors increasing every week and companies boosting their investments, including Fiesta Hotel Group, which is expanding its Grand Palladium Resort in Hanover. Investment is back to pre-recession levels and the government is encouraging competition. “We’ve been working diligently to create an enabling environment that will encourage business development and growth,” says Michael Stern, Jamaica’s minister for industry, investment and commerce.