How To Play Africa In 2015: Stocks, Funds & ETFs

By Staff Published: January 5, 2015, 7:36 am

Written by Dimitra DeFotis | From Barron’s

Is it too early to invest in Africa?

The opportunity and risk in Africa and frontier markets is the theme of the Morningstar magazine for December/January. Articles posit that investors will be searching to reallocate monies from slowing China to the next region of growth, and Africa is it with a massive, young population of 1.1 billion in a continent of 54 countries.

The article notes that the average investor gets Africa exposure by owning South Africa stocks, since that country represents the most sophisticated economy, largely due to natural resources. But Africa is 54 countries with a combined population of 1.1 billion.

Positives: Average inflation on the continent is 6%, and debt to GDP is 20% on the whole. Risks: Violent conflict, corruption, terrorism, disease and bad policies. Four countries have elections this year, including Nigeria’s presidential election in February.

Managers quoted were quite cautious, saying industrialization needs a big jump start:

“You can talk of a demographic dividend, but for that to occur, you need the right economic policies to create a vibrant economy generating sufficient job opportunities,” says Malek Bou-Diab, the portfolio manager of Bellevue DB African Opportunities Fund, based in Switzerland. “Compared to the evolution in China, all African countries have to be more proactive. It will have to boost investments.”

Bou-Diab has invested in Credit Agricole Egypt and other banks exposed to commercial loan growth in the Middle East and Africa.

One article also points to global conglomerates that are invested in Africa; among the biggest investors include Diageo and McDonald’s. Stocks positioned to profit as diets improve in Africa should not be ignored by long-term investors, writes Jeffrey Stafford in an accompanying article. Kraft spinout Mondelez International has strong positions in sub-Saharan Africa, and has “more exposure to India than other players.” Nestle also has exposure, and Africa may be the jewel in SABMiller’s crown.

Read more at Barron’s

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