Invest in Africa to Steer Clear of Debt Crisis: Strategist
Africa share valuations are compelling and the region is ripe for investment, Graham Stock, chief strategist at Insparo Asset Management, told CNBC Thursday.
“Now is absolutely the right time [to invest in Africa],” said the Africa expert.
“Valuations are very attractive. We are talking about price-earnings ratios in the low single digits in some cases. There are some very attractive opportunities across a wide range of countries.”
Stock described Africa as one of the fastest-growing regions in the world, predicting growth of 5.5 percent to 6 percent in both 2011 and 2012.
He added that the continent’s growth prospects are relatively immune to the sovereign debt crisis in Europe, as growth is being driven by a combination of domestic demand (particularly from the expanding middle classes), “tremendous” resource endowment, and investment from China and India.
“Long-term investment from the likes of China is driving infrastructure development that is feeding into rising productivity levels for the rest of the economies,” said Stock.
The strategist recommended investors gain exposure to the rising consumption power of the middle classes and look for opportunities in brewers, food manufacturers, telecommunications companies, and banks.
“Those kinds of names that tap into the basic disposable income that a family has at the end of the month are a key part of the story,” said Stock.
In terms of individual names, Stock recommended Nigerian banks Access Bank , First Bank of Nigeria and Guaranty Trust Bank , which he said combined strong balance sheets with revenue growth of 20 percent or more in the first half of 2011.
Stock also said he liked Zimbabwean brewer, Delta, which he said experienced sales growth of 70 percent last year, and would probably grow by a further 40 percent this year.
While some emerging market investors are deterred from Africa due to concerns about political risk, Stock said: “There is political risk everywhere. Our view is that it is better priced in Africa then it is in most parts of the world. You are getting compensated for the risks you are taking in these markets.”