Africa’s appeal as an investment destination has been highlighted rather than dented by recent equity volatility and negative emerging-market sentiment.
Steep declines on several developed and developing markets were not replicated in key African jurisdictions, emphasising the low correlation between African market behaviour and the rest of the world — a factor that can be used by sophisticated investors to balance portfolio risk.
This positive assessment comes from the Botswana-registered Imara financial services group and the marketer and manager of the Imara African Opportunities Fund, an investment product that houses assets from a wide range of African markets, including Kenya, Nigeria, Zimbabwe, Zambia and Malawi.
John Legat, head of Imara Asset Management Zimbabwe, noted: “The fund fell only 0,2% during June. To a large extent we have been oblivious to the extreme volatility witnessed in developed and emerging markets during May and June.
“South Africa proved to be the most volatile part of our portfolio thanks to the market as well as the rand. Botswana’s pula was also weak in sympathy, but did not fall as much. The Zambian kwacha held steady after May’s correction.
“Almost all of our other investments were either stable or went up. Though the fund’s intra-month results fell during June, it was by nothing like the severe falls seen in other emerging markets. Indeed, we were pleased to see the lack of correlation with other emerging markets in the majority of the markets represented in our fund.”
While stocks in South Africa and many other markets underwent a correction, some African counters continued to put in a strong performance. For example, in Zambia the earnings per share at Zambeef were up 88%, according to recently published interim results.
Legat added: “Low correlation to other markets not only appeals to contrarian investors, but [also to] those looking to manage downside risk by astute portfolio allocations across geographic regions. It’s a plus-point for Africa as a strategic investment destination.”
The Imara financial services group is incorporated in Botswana and has offices and affiliates in Gaborone, Johannesburg, Harare, London, Blantyre, Windhoek and Lusaka. Activities include investment banking, advisory services, stock broking and asset management