The debt crisis in Europe, worries about a possible double-dip recession in the U.S. and a slowdown in Chinese growth have trimmed market confidence worldwide, including in Africa and the Caribbean. South Africa’s main stock index fell nearly 3.0 percent in mid-August, tracking global markets, and analysts say investment returns likely will be much lower for the rest of the year. Kenya’s main bourse eased slightly as fears of potential violence during an Aug. 4 constitutional referendum drove investors to other African markets, but the success of the referendum is expected to create a favorable climate for foreign investors. “As a frontier market, Africa always presents a higher risk investment destination,” says Jan van der Does de Willebois, head of equities at Dyer and Blair Investment Bank. “The peaceful adoption of the new constitution is, however, injecting confidence back into the Kenyan stock market.”
In Egypt, returns likely will be slashed as rising wheat prices push the government into deeper deficits. Egypt was the world’s largest wheat importer last year. Wheat futures have risen 49 percent since June as drought damaged crops in Russia. Russia’s export ban is expected to add as much as $702 million to Cairo’s budget. With higher wheat prices and the debt crisis in Europe, EFG-Hermes Holding, Egypt’s biggest publicly traded bank, projects weaker profits for the third-quarter after a 45 percent drop in the second-quarter.
In the Caribbean, market watchers expect gains in the coming months, with market activity up and the economy boosted by higher remittance from the Diaspora. But for now the market lacks liquidity. “We have a target of producing a return equity of 20 percent, so the management team is becoming focused on becoming more efficient, growing revenues,” one fund manager says. GK Funds, which invests in Jamaican mutual funds, is already diversifying to stay afloat. Other companies are delisting from the dormant Barbados Stock Exchange. Jamaica’s main bourse rose 3 percent in mid-August while Trinidad and Tobago shares were up 4 percent.