North Africa has the potential to be one of the fastest growing investment markets in the world, according to analysts

News - Banking

Written by Ray Clancy

Friday, 02 July 2010 09:14

While the industrialised nations are grappling with sovereign debt problems, frontier markets are in enviably good shape with Northern Africa and the Black Sea region offering attractive prospects for investors, it is claimed.

As the economies in these regions grow and they benefit from their wealth of natural resources they are in a good position to outperform more traditional markets, according to Swiss & Global Asset Management.

After strong relative performance during 2008, Africa has once again shown its resilience during the European sovereign debt crisis, it says. ‘Although the surge in commodity prices has certainly been an important driver of African markets, sectors such as manufacturing, telecommunications and retail have seen strong growth and accounted for two thirds of Africa’s GDP growth in the last decade,’ it points out.

Nigeria, Kenya and Morocco are regarded as the best performing markets, outperforming emerging and frontier market indices since the beginning of the year. International investors are attracted by the continent‘s largely untapped markets, surplus of under utilised land and demographic growth. ‘Africa has the potential to be one of the fastest growing regions in the world in the next few years,’ it adds.

Although the Black Sea region was hit hard during the financial crisis, the Black Sea has the potential to stage one of the fastest recoveries, its analysts believe. ‘The contagion risk for the Black Sea region from the problems in the eurozone is limited. The region is skewed towards the Asian economies due to its easy access to commodities and low labour costs,’ it says in a note.

Ukraine is the region’s best performing stock market year-to-date, and Kazakhstan and Mongolia are also regarded as attractive. ‘These countries have enormous reserves of fossil fuels and plentiful supplies of other minerals and metals. They also foster strong ties with China, the world‘s biggest importer of commodities,’ it adds.