South Africa and other emerging markets in Africa, such as Egypt, Nigeria and Kenya, have been the worst hit by China’s market volatility, particularly because they are dependent on the export of commodities such as oil and industrial metals.
Despite warning signs about investing in Africa and the Caribbean, there is much to cheer about.
After positive performance during the last month, stocks in South Africa are expected to continue climbing over the coming months as company inventories fall while consumer spending rises. In many ways, that’s a mirror image of what’s going on across Africa and in Caribbean nations that are fast attracting investment from as far as Brazil, South America’s economic powerhouse.
Recent moves by a number of emerging African economies to cut interest rates and improve the investment climate resulted in gains for their stock markets.
Frontier stock markets in Africa rallied in June amid rosy growth prospects, but downside risks —the eurozone crisis, China’s economic slowdown and the possible rise in oil prices — aren’t far off.
Investing in Africa is now becoming very popular, with hedge funds and tons of cash going into what used to illiquid stock markets across the continent and even the Caribbean. I saw it when I visited Nairobi, Kenya’s capital, early this year. Foreign investors are establishing accounts with local stock retail shops.
A decade ago, Goldman Sachs Asset Management Chairman Jim O’Neill coined the acronym BRICS to refer to Brazil, Russia, India, China and South Africa, at the time fast-emerging economies with firm prospects of attracting the most investment and becoming the most dominant and positive force in the world economy