Afribiz presents a series, “A Picture of the African Capital Markets,” based on an interview with Michael Preiss, CEO of African Asset Management. Michael Preiss is a frequent guest and commentator for news organizations like Bloomberg, CNN, and CNBC. He is an expert on African and Asian capital markets.
2009 SETS THE STAGE FOR 2010 GROWTH POTENTIAL (27 December 2009)
The African capital markets surged in 2008, but deflated in 2009. What’s the outlook in 2010? Preiss said that some analysts believe that opportunities in BRIC countries are overdone. “Flat markets in 2010, like Africa, present excellent opportunities for investors,” indicated Price.
The best performer in 2009 in Africa was in the currency market, which also boosted stock market increases. The South African Rand was a top currency in 2009. “In effect, the 25% stock market increase in South Africa translated to a 60% increase in dollar terms because of the gains in the South African Rand against the U.S. Dollar,” shared Preiss.
In most African markets, the annual GDP remained positive in 2009. South Africa was an exception with a contracted economy. Preiss pointed out, however, that the real story is the inflation rates in African markets went down significantly. He adds, “A reduction in inflation also helps the real economy since the local businessman doesn’t have to fight rising costs due to inflation.”
THE POSSIBILITIES OF AFRICA IN 2010
The first major opportunity is in the African bond markets. Bond markets in Africa have strong potential since inflation rates have lowered.
The second major opportunity is in South Africa with the 2010 Soccer World Cup being held there. “Take the German market as an example, when Germany hosted the 2006 Soccer World Cup, you will see it became the best performing market globally that year, “ says Preiss.
A third opportunity is in the transportation market, particularly air transport. “If you look at Angola’s growth, you will see that air routes directly into the country supported the economic climate in the country,” mentioned Preiss. Delta Airlines added a route to Abuja, Nigeria in 2009 while planning another route to Accra, Ghana in 2010. Emirates now has 18 destinations in Africa, including Ivory Coast, Ghana, Sudan, Tanzania, Angola, Mauritius, Morocco, and Egypt.
OTHER CHANGES IN THE AFRICAN CAPITAL MARKETS (11 January 2010)
There are new stock exchanges expected to open in 2010. Another key development will be more exchanges operating electronically. “When Kenya’s stock exchange runs electronically, it will help liquidity,” shared Priess.
In closing, Preiss highlighted the role capital markets can have in developing national economies, including those in post-conflict states. Our strategist, Lauri Elliott quipped, “What a paradigm shift it would be if people give to help others by investing in companies in developing countries through their growing stock markets.” She added that if individuals and organizations invested in firms with growth potential, who also were committed to local job creation and improving local communities, this might accelerate economic and social development in parts of Africa.