The most recent Milken Global Conference in Los Angeles featured a panel entitled, “Two, Three, Many Middle Easts: A Region’s Economic Prospects”, whose commentary is really only for the hard core MENA geeks, but I thought these charts were worth drawing attention to:
This one was the leader, showing average real GDP per capita from 1980 to 2000:
Here we have slides showing variation in GDP per capita across the Middle East and North Africa since 2001. Notice the y-axis scale difference between the Gulf states in the rightmost chart versus North Africa and “core” Middle East:
An approximate comparison of just how miniscule FDI flows to the region relative to the world:
Of the FDI that does go to the region, we shouldn’t be surprised to find more of it going to the oil producers than to the non-oil producers:
And yet expected GDP growth for the coming few years is expected to be mostly uniform:
Finally, intra-regional FDI against total FDI to the region:
The link to the full hour panel discussion is here and embedded below. If MENA development is your gig, I guarantee there’s something in there for everyone, from diplomats to venture capitalists and anyone in between. For my time, by far the best bang for the buck commentary comes from Chris Schroeder, who starts speaking at approximately minute 36. This man talks way too fast for me to transcribe or bother quoting any of it, but suffice it to say he depicts in words far more illustrious than any of these charts the economic potential the Arab World possesses.
Bloomberg had a story out late last week about plans for an Angola Stock Exchange, entitled, “Angola Plans 6th-Biggest Africa Bourse With Value at 10% of GDP”. Since we (and by we, I mean you and me, in an apparently small minority) are resolved to have a realistic approach in discussing economic prospects anywhere, here are the main points of interest from the article once we strip away all the spin and optimism:
Angola, Africa’s second-biggest oil producer, expects its stock exchange to have a market value of 10 percent of gross domestic product within 18 months of its startup, making it at least the continent’s sixth biggest.
The capitalization of the exchange, set to start in 2015, would be a minimum of $11 billion based on last year’s output of $114 billion.
The Angolan government is forecasting economic growth of 7.1 percent this year, down from 7.4 percent in 2012.
A secondary bond market will start this year to help develop a yield curve.
South Africa’s bourse is the continent’s largest at $842 billion, more than double its GDP.
Angola ranks 157th out of 176 countries on Transparency International’s 2012 Corruption Perceptions Index.
The investment bank Imara just put together this brief which summarizes some key data points for other stock markets in Africa. There’s some good trading info in there but missing is any indication of market capitalization figures. I should add that this isn’t Imara’s fault necessarily as this data is generally pretty hard to come by.
The thing is, this isn’t the first time Angola has made efforts at opening a stock exchange. In December 2007, allAfrica.com ran a story entitled, “Angola: Stock Exchange Opens in 2008”, but I definitely remember hearing about this before then, though not as far back as 2003, which is when this article dates the beginning of the process.
In any event, here’s a more “recent” take on the Angola stock exchange prediction, from How We Made It In Africa in 2010. Apparently, Angola’s planned exchange was then expected to be the third largest in Africa. Particularly striking from the 2010 article was this little snippet: Continue reading →
I can’t get this article from the FT’s William Wallis out of my head. The headline is “Currencies pressed by trade imbalances” but this really only captures a small slice of the picture. Check it out:
With import demand outstripping export growth in some of the continent’s fastest expanding economies, rising trade imbalances are putting pressure on currencies. African and international investors hedge against this by spreading risk – one factor that is driving African banks and businesses across borders.
But even an expansive footprint is not always enough. MTN, the continent’s leading telecoms provider with a presence in 21 African countries, announced that currency swings had weighed heavily on its earnings.
More broadly says Razia Khan, head of Africa research at Standard Chartered Bank, widening current account deficits are the result of an investment and consumption boom, new resource exploration activity and “the scaling up of output”. Ghana fits into this category. It is also on the risk radar this year as heavy investment in oil and gas infrastructure continues, with only modest increases forecast for oil output.
A weak currency does not help those African countries with limited capacity to ramp up exports in response. Kenya cannot for example suddenly double tea production. So, it is forced to defend its currency to avert importing inflation.
Loose monetary policy in major developed economies has driven a rush of short-term funds into African markets. David Cowan, Africa economist at Citibank, says the way in which central banks defend their currencies and the margins that foreign investors earn will be one determining factor in how long the appetite endures.
I don’t disagree with any of this but would point out that this is all just the tip of the iceberg and there are a lot of ways to slice this.
One is that just six of Africa’s 53 countries account for two-thirds of the entirety of Africa’s $2.0 trillion economy. In descending order of nominal GDP: South Africa, Nigeria, Egypt, Algeria, Angola and Morocco. I think a pie chart best demonstrates this relationship:
Another is to think about how much of Africa’s total economy is driven by oil exports. Let’s try the following table to demonstrate this:
You may have heard by now that the jig is up on the BRIC acronym as an investment class. But we’ll all still have to spend at least another couple years discussing how it doesn’t work, so if you’re just getting used to BRIC, fear not, you can still throw that one around and give the appearance of knowing what you’re talking about.
In any event, I have a new investment theme acronym. This is better than CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa), MIST (Mexico, Indonesia, South Korea, Turkey), PIIGS (Portugal, Italy, Ireland, Greece, Spain), CASSH (Canada, Australia, Singapore, Switzerland, Hong Kong) and even SWAG (Silver, Wine, Art, Gold).
Ready? Here it is: VIMBENT.
You heard that here first.
These, apparently, are the countries New York-based Caravel Management is invested in, according to a Bloomberg interview with portfolio manager Caglar Somek earlier this week:
There’s only so much one can fit into a six-minute segment, so to the credit of both interviewer and interviewee, here’s what seem to be the main ideas behind the VIMBENT strategy: Continue reading →
This is actually going to be a few charts, because the first chart as you can see looks ridiculous:
It should go without saying that there’s something very wrong with this picture, and indeed Miguel Octavio sums it up better than anyone I know here, but the long and short of it is that runaway inflation and an ass-headed capital controls regime has wildly overstated the “returns” in Venezuela. So let’s get rid of Venezuela and look at how the rest of these stack up against the Dow Jones Industrial Average. Here’s what we get:
After solid gains at the beginning of the year for Middle Eastern ETFs, performance has foundered in no small part due to heightening fears of a currency devaluation in Egypt.
It’s been a few years, but there was a time not long ago when currency devaluations were much more frequent. Should Egypt indeed devalue the pound, reviewing this recent history raises certain questions for Egypt’s immediate outlook that beg to be answered.
Bridgewater Associates’ Ray Dalio has recently updated a white paper outlining the basic template of developed markets. Since my concern is emerging and frontier markets, I’m going to take his arguments at face value as they apply to the U.S. and extract what is relevant in assessing economies where information is not always so forthcoming.
And for those who don’t know who Ray Dalio is, he founded the largest hedge fund in the world, Bridgewater Associates, which manages well more than US$100 billion (see Contrarian Investor yesterday for a very informative guide to visualizing this number). Continue reading →
Lots of stuff in here for Frontier Markets junkies. Foreign investment in Africa is up by an average of 80 percent over the past decade and forecasts indicate it’s likely to reach $150 billion by 2015, so this is a big topic that I already know I’m going to come back to. Continue reading →