Nigeria and six other sub-Saharan African (SSA) countries have been adjudged positive in the performance of their respective Sovereign Bond Index by Bloomberg when compared with those outside the continent.
Among the SSA countries included in the report, which specifically noted that they are “weathering the global bond tempest better than most” are Angola, Gabon and Kenya.
“Seven of nine sub-Saharan African nations have outperformed the Bloomberg Emerging-Market Sovereign Bond Index since April 15, when a gauge tracking euro-area bonds reached a record high before the selloff wiped more than $400 billion off the value of global fixed-income markets.
“Dollar securities from the continent lost 1.9 percent in the period, compared with a 3.1 percent drop for emerging-market debt, six percent for euro-area bonds and three per cent for U.S. Treasuries.
“The slump started as investors balked at record-low yields from Asia to Europe amid speculation the Federal Reserve is preparing to raise interest rates. While African debt hasn’t entirely escaped the rout, yields are sufficiently alluring to entice investors tempted by the continent’s growth prospects,” the report said.
Kaan Nazli, who helps oversee $4.8 billion of emerging-market debt at Neuberger Berman Europe Limited, in The Hague, said: “It has enough good stories that would make it more resilient. The yields are still attractive. These will help cushion during this period in which monetary conditions globally will be tightening.”
Gabon sold a $500 million Eurobond due in June 2024 last week that was about six times oversubscribed and bought by more than 200 investors.
That “speaks about how investors look at Africa and suggests there’s relative immunity to the coming Fed cycle,” said Nazli.
Sub-Saharan Africa’s economy will grow by 4.5 per cent this year, faster than any other region aside from emerging Asia, which includes China and India, the International Monetary Fund (IMF) had said in April.
The region’s ratio of external debt to gross domestic product will be 27 per cent at the end of 2015, compared with 69 per cent for developing Europe and 37 per cent for Latin America and the Caribbean, according to the IMF.
“So far as growth is concerned, sub-Saharan Africa is still on a very firm footing and therefore provides relative value. There’s not much value in Eastern Europe or even in the larger emerging markets,” an economist at Rand Merchant Bank, from Johannesburg, Nema Ramkhelawan-Bhana, said.
The report noted that Nigeria, Africa’s biggest economy, which is struggling amid Brent crude’s 38 per cent slide in the last year, are faring better than countries outside the continent.
Nigeria’s dollar bonds have lost 0.3 per cent since April 15, against 1.9 per cent for Russia and 3.9 per cent for Brazil.
Relative political stability in most Sub-Saharan Eurobond issuers adds to their appeal, according to Ray Zucaro, who helps manage about $380 million of assets for Los Angeles-based SW Asset Management.
“Just look at the political volatility we’re seeing in Argentina, Venezuela, Brazil, Ukraine and Russia. With a lot of the frontier names in Africa, you don’t have that,” Zucaro said.