Investor Confidence Rises
Investors are putting their money back into stocks, pushing equity markets slightly higher in Africa and the Caribbean. Banking and commodities are leading the charge amid signs the world economy is stabilizing. The gains, though still fragile, offer glimmers of hope.
It all started in March when Washington unveiled a $1 trillion plan to get rid of toxic bank assets that weighed down banking stocks, triggering a rally that rippled through markets worldwide. In April, the Bank of Jamaica cut interest rates, sending a psychological message that boosted consumer lending and nudged shares back up. Sure, inflation remains a problem, but it’s manageable at this point, as the market regains confidence.
Meanwhile, Standard & Poor’s expressed confidence in the Barbadian currency, despite warnings about potential fiscal problems down the road. In Trinidad and Tobago, the traded value for the main stock index was up 5 percent in the first quarter of 2009 before losing some of the gains in April. While the energy sector is under pressure, the twin island’s financial sector is benefiting from rising deposits, with falling interest rates attracting more investors.
Volatility has given way to stability in Africa, as well. Egypt recently removed curbs on foreign textile products because the local market has stabilized. Cairo’s main stock index was lifted in mid-April by surging telecom and banking sectors, as domestic and foreign investors sought investments that could survive the downturn. Stock prices have corrected to fair values, but investors need to adjust expectations and look for medium term investments, analysts say.
Having escaped much of the slowdown last year, sub-Saharan Africa is now undergoing the delayed effects of the global recession. Kenya’s largest bank by way of market penetration was delisted for failing to pay debt owed to investors. The outlook for the year is bleak, with political tensions making a comeback, forcing investors to hold back. Other parts of the continent show hopeful signs. DeBeers Group suspended operation at a handful of diamond mines in Botswana, but the country has socked away lots of foreign exchange reserves, cushioning the blow. Ghana and Uganda, previously seen as too risky for oil exploration, are now luring energy investors. Oil production will begin next year in both countries, opening a big, new revenue stream.
In South Africa, the economy slid into recession at the end of 2008 as manufacturing and mining sectors felled, but the banking sector is in pretty good shape, and modest growth is still expected, despite concerns about political stability.