Our markets received a fair amount of attention this week, even from the highest level as Uncle Sam made a dual appearance in the region.
In Ghana, President Obama said that while the US is interested in Africa’s assets, it can’t provide financial backing. He did, however, offer the moral advice for the region to strengthen its governance so that Africa can take care of itself going forward. It was certainly a brave message (I refer to him showing empty pockets) and it says much about the man who delivered it with such dignity. At the same time, and in a somewhat more desperate fashion; the secretary of the US treasury Timothy Geithner took his solvency road show to the Gulf region to assure that the US is good for its money.
What is undoubtedly ironic is that the representative of the US treasury is asking for the financial support of countries that have a lower credit rating than that of his own country. You have probably heard or seen our credo that “the world is turning upside down”. We keep saying this because we strongly believe there are anomalies in the global economy that will eventually have to be addressed; one of them is the fact that there are many countries which enjoy healthy fiscal balances due to vast reserves that still have to pay higher interest rates on their debt than the most indebted nation on the planet. How absurd is this?
We will launch a fixed income fund in September that will capitalize on this long term trend of adjustment. The fund will be named the “Silk Road Income Fund”. It will mainly invest in the sovereign debt of nascent economies that benefit from healthy fiscal balances, some of which have a peg to the US$ (and often pay very handsome spreads above Treasuries!) and others that have potentially undervalued local currencies. Please stay tuned for more on this in the near future…
With regards to last week’s markets in Africa and the Middle East we saw more of a positive sentiment and strong returns imported from the world’s major markets. This was especially the case for Egypt, South Africa, Qatar and Saudi Arabia. Nevertheless, there were a few markets that took a beating such as Nigeria, Morocco and Bahrain. This week serves as yet another example that asset allocation is very important in Africa as is being highly diversified.
The GCC enjoyed a positive week on a mix of reasonable earnings and improved sentiment in global markets. There are still a few mysteries on possible bad debts on the books that remain unaccounted for and it looks like we will need to get through the reporting season for more clarity on this. We were in the Gulf last week and in Qatar on the day the market jumped by more than 6%, needless to say that everyone seemed to be in a fairly good mood.
We were on the radio in Dubai to share our views on Africa. If you have a few minutes, here’s a recording of the interview:
Zin Bekkali, CEO of Silk Invest, gives his views on investment into Africa.
(Link to original article: http://www.zawya.com/radio/default.cfm/sidDE0907160536556792)
Please refer to the below link weekly updates for more detail on what happened in our markets of focus.
We look forward to keeping you updated.
With kind regards
Baldwin
The weekly reports can be accessed via the products updates section.
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