Africa looks to second-half investment upturn

Africa looks to second-half investment upturn

Published: June 2, 2011

Continent sits “at the edge of emerging markets confidence”, says Standard Bank research head.

African economies should benefit from revived investor interest in emerging markets during the second half of the year, according to Standard Bank’s head of Africa research.

Speaking at a roundtable to discuss the bank’s “African Markets Revealed” report, research head Stephen Bailey-Smith noted that African countries had exited the financial crisis “extremely well”, with few entering recession. He added that the manner in which they now remove fiscal and monetary stimuli will define their economies in the coming years.

Investors’ concerns over that stimulus removal in Africa and other emerging economies saw local debt and equity in emerging markets underperform developed markets during the first quarter, Bailey-Smith said.

“There was a perception that emerging market governments would have to raise rates much aggressively than their development market counterparts because food and fuel inflations hits them that much harder,” he said. “I think there was a concern that they would put the brakes on much more swiftly than possibly was necessary and we saw the switching back to development markets and out of emerging markets.”

He adds that this trend could now have come to an end: “I think the second half of this year will see people getting back into emerging markets, which frankly will outperform on a growth basis consistently.”

“I’m still very much an emerging market bull,” Bailey-Smith said. “Africa sits at the edge of emerging markets confidence. When people are confident about the rest of the emerging markets, that spills into the frontier markets, including Africa.”