African fund inflows near $1bn as foreign investors regain risk appetite
August 4, 2009
By Ed Cropley Johannesburg
Africa had attracted almost $1 billion (R7.7bn) of net fund inflows this year, a reverse of the panic sell-off that hit the continent's nascent markets at the end of last year and early this year, according to fund trackers EPFR Global.
So far this year, investors had put $990 million into Africa, and last week funds in the so-called "frontier market" region attracted net inflows for the ninth week out of the previous 12.
"If the current trends hold, the $1bn mark should be crossed this week," Cameron Brandt, EPFR's global markets analyst, said.
The flows are further evidence of the return among some global investors of an appetite for the higher risks and higher yields of developing markets after a flight to the safety of cash and developed country debt late last year.
They underscore the long-term logic of investment in a continent that is home to up to a third of the world's mineral resources and is slowly getting its game together.
The JSE, Africa's biggest bourse, is up 38 percent from a low hit on November 20 last year, although the effect on the rest of the sub-Saharan region has been more muted.
Nigeria, which went from boom to bust last year with the ending of a banking share bubble, has risen 18 percent in the past quarter, but remains down nearly 20 percent this year.
Kenya tells a similar story, with Nairobi's main index posting a 38 percent rise from early March lows that has nevertheless left it at only just over half an early 2007 peak.
Analysts and fund managers said the turbulence of the last 12 months was unlikely to wipe out the gains made in the last five years on the back of a commodity price boom, debt forgiveness, a flood of foreign direct investment and improving levels of governance.
"Despite the impact of the global crisis and periodic bouts of political turmoil, the theme of an African economic renaissance is not likely to vanish," Deutsche Bank said last week.
Underpinning the expectations are forecasts for African countries to post some of the strongest growth this year, with the International Monetary Fund seeing the likes of Uganda and Malawi expanding at more than 6 percent.
South Africa is stuck in its first recession in 17 years, but most economists expect it to expand by about 2 percent next year, helped in part by its hosting of the soccer World Cup.
"We're starting to see some very significant inflows right now," said John Mackie, the head of Africa funds at Stanlib, citing particular interest from the Middle East and African pension funds. - Reuters
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