Relative to weightings in the Global MSCI EM Index, there are countries that are hot and some that are not, and it’s not all based on fundamentals. We care because hot markets have priced in good news and cold markets may offer opportunities once a catalyst changes sentiment.
HSBC pulled out of Nedbank deal.
The next Trading the Globe special will air on CNBC tonight. Topics include an in-depth look at Argentina and a preview of what could be a contentious G20 meeting
With an M&A run rate of $54 billion from Marakesh to Johannesburg, African companies are having a great year. We discuss the opportunities on CNBC’s Trading the Globe this morning.
If you are looking for double-digit earnings growth at single-digit valuations, Africa is one of the last remaining places on Earth that you will be able to find it. Local companies benefit from strong consumer demand and investors benefit from high dividend yields.
In fact, African mutual funds and ETFs have seen investors pump a record $610 million into their portfolios so far this year.
But those flows can conceal a relative lack of variety in the individual African stocks that U.S. investors can buy.
There are only 88 ADRs to cover the entire African continent — one from Zambia, three from Egypt and the rest from South Africa.
South Africa is of course a very exciting economy, contributing 17% of all of Africa’s total GDP, but getting exposure to the other 83% of the continent is difficult.
You can simply buy into the Africa ETF AFK (quote), which is up 17.8% so far this year.
However, even AFK has trouble investing its entire portfolio on the continent itself. About 30% of the fund’s assets are in South Africa — companies like AngloGold (AU, quote) and Old Mutual (ODMTY, quote) — and another 19% are in Egypt, largely in ORSTF (quote) and ORSDF (quote).
Another 30% comes from Nigeria, Morocco and Kenya, where retail exposure is very hard to come by.
But the remaining 21% represents “offshore” exposure to African markets — global companies that do business on the continent, but are not actually African stocks!
Global cell phone giant Millicom posted a satisfying quarter — roughly in line with consensus — as its business in Africa and Latin America continued to expand.
The Luxembourg-based company earned a profit of $436 million in the second quarter, up 17% on a year-over-year basis. Analysts had expected a marginally smaller number.
Likewise, Millicom (MICC, quote) slightly beat the Street on revenue, which expanded 14% to $929 million thanks to increased subscriber share in Africa and South America.
MICC is a somewhat unique company because it provides investors with exposure to a wide range of emerging and frontier markets that are otherwise hard to play. The company has roughly a 30% share of African cell phone usage and 53% of the Central American market.