African currencies fell nearly 2 percent versus the U.S. dollar late November as risk aversion fed by debt crises in Europe hit riskier emerging and frontier markets. Stock indices also posted losses in Johannesburg and elsewhere in Africa and the Caribbean, retreating after October gains on successful bond auctions by several central banks.
The Irish debt woes that threaten to spread to other euro zone countries has dampened risk appetite globally, with investors pushing down Kenya’s main stock index by as much as 3 percent for the month, while gains for Egypt’s main bourse in Cairo were limited to 1 percent. South Africa’s JSE index eased 2 percent, with the rand plummeting to a 10-month low.
Analysts said the euro/dollar dynamics have been front and center for equity markets in Africa and the Caribbean. However, domestic matters, including plans for unveiling of 2011 budget in Nigeria, decisions on key interest rates in Kenya and the sale of state firms in several countries, will likely drive trading as 2010 draws to a close.
In the Caribbean, meanwhile, the least-developed frontier markets could fall off the emerging markets bandwagon as a second tranche of U.S. bond-buying program risks fueling inflation that may be more damaging to their economies than most. While the main Jamaican stock index rose 3 percent in November, the bourses in Trinidad and Tobago, as well as the Barbadian index, were largely flat. Data by Van Eck Fund, which invests in exchange-traded funds with exposure to Latin America and the Caribbean, also show modest gains in values and returns for the final quarter of the year.
For anyone considering investing in the Caribbean, IPOs being planned by a number of companies offer a perfect opportunity to enter the market. For example, Atlanta-based Mirant Corp. is selling its 80 percent stake, worth $17.5 billion, in Jamaica Public Service Co., a power utility firm. Since Mirant, which is listed on the New York Stock Exchange, is trying to divest from the Caribbean market, chances are it will also sell its holdings in Trinidad, Curacao and Bahamas. Mirant is trying to consolidate its business in North America after emerging from Chapter 11 bankruptcy in January.
Meanwhile, the International Finance Corporation's infusion of $75 million in Trinidadian insurance firm Guardian Holdings has boosted confidence about growth in that country. That, in turn, should help attract other foreign investors. The investment gives IFC a 13 percent share in GHL and the stock will trade for $16 per share on the TTSE.