Investing in Africa - The Highs and Lows
Africa: What's Hot and What's Not - Series 1: Finance
Paul Ababio
Issue date: 3/10/09 Section: Voices
Part 1 of Three Thoughts on Africa: Finance, New Media and Culture, Where to go this year and next year.
This is the first piece of a column I will be managing (contributions most welcome - especially from those going on spring break treks!)
While your friends in North American-focused alternative investments may be weeping over the woeful returns in 2008, check with their African counterparts and they will quickly remind you of what a killing they are making from investments in Nigerian banks and Namibian mining companies. While I smacked my lips at the fat returns on the Ghanaian stock exchange for 2008 (two stocks I had been tracking, Enterprise Insurance Corp and Ecobank Ghana, were up 141% and 125% for the year), I was envious of those who had placed their bets on a small paper company, Super Paper Products Company, whose share price was up a whopping 203% for the year.
Before I rushed to rebalance my portfolio, I paused to reflect on some of the lessons from Silber's Finance class and the ongoing credit-crisis-cum-recession: the promise of great rewards has its attendant risks, and African markets are no exception. For one, I looked woefully as liquidity simply evaporated from the markets. On January 2, only 35,014 shares were traded on the Ghana Stock Exchange, with a total value of $24,124… and yes, those are nominal dollars at the applicable exchange rate on the same day, no zeros have been lopped off nor is there some other numerical trick as has become the fad these days. While turnover was up significantly (187% during 2008), I was quite surprised to find out from my broker's publication that one stock accounted for 72% of volume and 73% of value traded in 2008.
On the other side of the Continent, Kenya's top 20 stocks were down 48% in 2008, with only one gainer for the year, Equity Bank, up 17%. While Kenya was lauded in 2006 and 2007 as a top destination for investment dollars, the political strife of 2008 and the immediate flight of fast money from the country's capital markets also highlighted the risks of frontier markets to long-term investors: there's nothing like a free lunch, except for IPO plays when you can sell your subscribed stock within a week of the issuance!
This is the first piece of a column I will be managing (contributions most welcome - especially from those going on spring break treks!)
While your friends in North American-focused alternative investments may be weeping over the woeful returns in 2008, check with their African counterparts and they will quickly remind you of what a killing they are making from investments in Nigerian banks and Namibian mining companies. While I smacked my lips at the fat returns on the Ghanaian stock exchange for 2008 (two stocks I had been tracking, Enterprise Insurance Corp and Ecobank Ghana, were up 141% and 125% for the year), I was envious of those who had placed their bets on a small paper company, Super Paper Products Company, whose share price was up a whopping 203% for the year.
Before I rushed to rebalance my portfolio, I paused to reflect on some of the lessons from Silber's Finance class and the ongoing credit-crisis-cum-recession: the promise of great rewards has its attendant risks, and African markets are no exception. For one, I looked woefully as liquidity simply evaporated from the markets. On January 2, only 35,014 shares were traded on the Ghana Stock Exchange, with a total value of $24,124… and yes, those are nominal dollars at the applicable exchange rate on the same day, no zeros have been lopped off nor is there some other numerical trick as has become the fad these days. While turnover was up significantly (187% during 2008), I was quite surprised to find out from my broker's publication that one stock accounted for 72% of volume and 73% of value traded in 2008.
On the other side of the Continent, Kenya's top 20 stocks were down 48% in 2008, with only one gainer for the year, Equity Bank, up 17%. While Kenya was lauded in 2006 and 2007 as a top destination for investment dollars, the political strife of 2008 and the immediate flight of fast money from the country's capital markets also highlighted the risks of frontier markets to long-term investors: there's nothing like a free lunch, except for IPO plays when you can sell your subscribed stock within a week of the issuance!
Viewing Comments 1 - 1 of 1
Odchudzanie
posted 7/03/09 @ 8:36 PM EST
Great article, I didn’t know Africans Market can be so firm like you are saying ‘a small paper company, Super Paper Products Company, whose share price was up a whopping 203% for the year. (Continued…)
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