Zim market may boom in 2011
London - Zimbabwean equities top the list of attractive investment options in Africa next year as its economy stirs back to life after years of crises, Insparo Asset Management says.
Insparo's chief strategist Graham Stock said that during a visit to the country a month ago, he and his colleagues had been reassured by political calm and economic growth in the economy since the adoption of the US dollar last year after hyperinflation had made its own currency practically worthless.
"Our favourite equities story is Zimbabwe ... (Adopting the dollar) has provided a base for the economy and key companies," he told Reuters at his office in London. Insparo focuses on frontier markets.
He cited brewer Delta Corporation, telecoms firm Econet, food retailer Innscor Africa and seed producer Seed Co.
"These are companies that are doing well out of dollarisation. These are the dominant companies in their sectors, and we expect (GDP) growth of around 10% in 2011, so that will provide some fuel for the equity market," Stock said.
Finance Minister Tendai Biti expects the economy to grow by 8.1% this year, rising to nearly 10% next year as the key mining and agriculture sectors expand.
Political disputes over policies and election results led to the collapse of an economy that was regarded as one of frontier Africa's most promising and dynamic markets.
President Robert Mugabe and Prime Minister Morgan Tsvangirai agreed to share power after disputed elections in 2008.
Their uneasy coalition has been beset by disputes in recent weeks, prompting South Africa's President Jacob Zuma to travel to Harare last week to persuade the two to address the disagreements.
"There is still work to do in implementing the political agreement," Stock said, adding there were capital constraints in the country, which translates into attractive potential yields.
Another fund, Imara Asset Management, said earlier this month that Zimbabwe's stock exchange, with its 78 stocks, is a bargain.
Zimbabwe's main Industrials Index has traded in a range of 120 to 170 points since a big jump immediately after dollarisation.
Insparo manages a $200m fund focusing on Africa and the Middle East. It plans to launch a second fund next year, which will focus on African equities, Stock said, adding its size would be unveiled at a later date.
China and other emerging countries will continue to grow strongly, Stock said, presenting opportunities for Africa especially in the resources sector.
"Oil exporters, copper producers, iron ore producers, they should all do well in that scenario," he said.
"Macro fundamentals in Africa remain strong, governance remains good, fiscal deficits are under control, debt levels remain low, and all that is providing a good backdrop for growth and asset class performance in Africa."
Insparo has also invested in Nigerian equities, Ghanaian local currency debt, Ivorian dollar-denominated bonds. In Kenya, Stock likes Kenya Commercial Bank and telecoms operator Safaricom.
Stock said although there were more than 10 elections scheduled for next year in Africa in places like Nigeria, there were no significant risk to the continent's economy.
A recent IMF study showed there was no significant correlation of economic performance and election timetables in most of Africa.
The study's findings boosted foreign investor interest in the continent, home to one billion people.
"Valuations are still very attractive on a relative basis compared to other emerging market regions, particularly the BRICs, where we have seen a lot of equity market inflows," Stock said.