Africa poised as the next big thing in emerging-market stocks

LAGOS (Capital Markets in Africa) – With plenty of economic and political issues surrounding Africa, many investors are hesitant on whether they should invest in this emerging market.

The continent is consistently appearing in the news due to the fact it is struggling to contend with illnesses such as Ebola as well as the many armed conflicts that are being documented, which is making Westerners uneasy. In fact, the continent barely appears on some investors’ radars because of these issues.

David Snowball, the publisher of the Mutual Fund Observer newsletter, estimated that only $3 of every $1000 of the average portfolio in the United States is invested in African assets.

While it is true that many African investments haven’t fared well in the past, there have been a lot of improvements over the past few years. In the African Attractiveness Survey presented by Ernest & Young, it was revealed that the continent moved from the third last position in 2011 to the second most attractive region to invest in this year. The same survey projects the Foreign Direct Investment in sub-Saharan African will continue on an upward trend.

With plenty of things going in Africa’s favour of late, the continent could be at the foothills of a promising upturn.

Based on the data presented by the African Economic Outlook, the real GDP of the whole content is projected to grow by 4.5% in 2017 compared to 3.7% last year.

Here are the drivers of the 2017 real GDP in Africa that help local economies to accelerate:

• Foreign investments in natural resources
• Increased public spending on infrastructure
• Better agricultural production

“African nations have the potential to double their economies over the next decade,” said Paul Collier, co-director at the Centre for the Study of African Economies at Oxford University. “You’re looking at strong economic growth, reasonable economic management, and favourable balance sheets.”

For investors and traders, Africa offers plenty of avenues to reap a better return and cash for greater growth. In the world of trading, leading stocks in Africa can provide plenty of growth opportunities for traders in diversifying their portfolio. Mixed with trading strategies and methods, these equities are powerful in hedging risks and excessive costs brought about by micro market movements. TeraMusu explained that there are diverse methodologies one can apply to manage risks in unpredictable markets, such as ladder and one touch options.

While economic growth and a rising stock market do not always happen at the same time, some investors and investment experts believe that the two will be creating a virtuous cycle in Africa.

“We believe that Africa could be the ‘emerging market’ story of the next decade,” said Mark Mobius, executive chairman of Templeton Emerging Markets Group and manager of the Templeton Africa Fund.

However, African stocks are a speculative play that offers high rewards and high risks. Most of the continent’s stock markets are relatively new and expensive for many foreign investors, especially when managing risks brought about by financial and political corruption.

While African stocks offer great rewards, it’s not advisable for conservative investors and traders. Obviously, there will still be a stiff fall in its unpredictable market, and only those patient-enough to wait will be able to gain from it. Given the risks and opportunities in trading and investing African stocks, a broad strategy is necessary to increase returns.