Those who have met with us during the past few months may remember how exited we get when we present ‘slide 23’; the bar chart where we put into perspective the debt as percentage of GDP vs. reserves across the world’s main regions. The point we always attempt to make with this visual is: while the US, Europe and Japan have serious fiscal imbalances (bluntly: an unsustainable debt burden totaling multiples of reserves), Asia, Africa and the Middle East are in a privileged position, in some cases such as Africa and the Middle East, reserves even handsomely exceed debt levels. Last Friday, we observed with much interest that The Economist decided to run this story on its front page. We have also noticed that there are a handful of well published economists that are becoming increasingly assertive about this reality. Are people finally starting to talk about this “elephant in the room”? Eventually, we expect our favorite markets to benefit from Increased allocations of investor’s capital on the back of this… it simply makes sense to invest your money in places that have higher reserves than debt, simple as that!
It continues to become increasingly difficult to generalize the markets in Africa and the Middle East. The GCC exchanges closed the week in the red with Dubai and Qatar coming off after recent stellar gains. The Magreb markets; Morocco and Tunisia; continued to tick upwards, the latter receiving much attention due to its slated IPOs for the near future. In Africa, this was Kenya’s “week in the sun”. The importance of asset allocation and a solid bottom up stock selection discipline is increasing when investing in these regions especially when considered that many of the investment opportunities don’t come in the shape of large caps that can be easily traded or added to a basket of an ETF or a similar ‘market tracking’ strategy.
We are also happy to see that increased cross-continental and regional business is on the rise. A clear example of this is the funding of what could well be a Pan African Agriculture venture as various investors from the Gulf Region have stated their interest in investing in AgriCap, a food and investment company in Morocco that will offer financial solutions to agricultural initiatives across North and Sub-Saharan Africa and the broader MENA region. Another interesting piece of evidence supporting this trend is Kenya Commercial Limited becoming the first company to list on all four stock exchanges within East Africa.
Finally, I hope you forgive me for ‘blowing our horn’ a bit but Daniel Broby, our CIO was one of the speakers at the GAIM conference in Monaco last week. Worth mentioning may be the fact that our strategy got the top score from the judges during a ‘quick fire presentation competition’. We are proud because we were competing against some of the top hedge funds! This week Daniel is the Chairman of the ‘ Investing in Frontier Market Debt Conference’ in London. John Bates, our Head of Fixed Income, will also be one of the key speakers. We will soon be launching our Silk Road Income Fund which will invest in fixed income across Africa, Middle East and Central Asia so we are honored to be featured amongst the leading players in the Frontier Market Fixed Income scene!
I hope you have a moment to have a look at our weekly market update which contains more information about the African and Middle Eastern equity markets.
We look forward to keeping you updated on the African and MENA markets.
With kind regards
Baldwin
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