Africa’s stocks and bonds are starting to win over investors scouring some of the developing world’s most beaten-down markets for returns.
Yet stock markets on the continent, excluding SA’s, are getting increasingly cheap as their discount to developing peers continues to widen to a record. And the average spread on the region’s sovereign debt is about 670 basis points, almost double the emerging-market average and more than 200 basis points higher than global high-yield debt.
“African equity markets haven’t recovered price-wise from the March and April lows,” said Paul Robinson, a Johannesburg-based money manager at Laurium Capital. “Africa is perceived to be a lot more risky than it really is.” Laurium Capital, whose Limpopo Africa Fund has outperformed the continent’s markets in the last five years, sees opportunities in small- and mid-cap stocks in Egypt and Morocco as well as banking shares in Nigeria. Loomis Sayles is “looking at incrementally increasing exposure” to African debt, said Elisabeth Colleran, a Boston-based portfolio manager.
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