Investment Week’s Post

From Investment IQ. Emerging market sovereigns that have restructured their debt present a new set of opportunities for fixed income investors. Countries like Zambia, Ghana, and Sri Lanka have posted strong returns following recent restructurings, with innovative bond features tied to economic performance. Vanguard 🔗 Read the full article on Investment IQ: https://incm.pub/4fK4tkW #investing #assetmanagement #wealthmanagement #finance

NSIA: Nigeria Sovereign Investment Authority's operating income soared by 1058% to N1.18trn in FY 2023 from N101.10bn in FY 2022, driven by substantial foreign exchange gains of 92%. read more below:

Last week, S&P Global held their 4th Annual Global Emerging Markets Conference, providing invaluable insights from a lineup of exceptional speakers. From asset managers to industry experts, they shared unique perspectives on pressing issues impacting Emerging Markets. Special thanks to Frank Gill, Alaa Bushehri, Charles Chang, Chris Kushlis, Elijah Oliveros-Rosen. A Spotlight on Debt Financing in Frontier Markets One of the most compelling discussions centered around debt financing in Frontier Markets. These nations often lack deep internal capital markets, relying heavily on external financing to make significant economic strides. These issues led to Zambia, Ghana, and Ethiopia defaulting on their debts when interest rates spiked. The only solution seems to be more debt financing. Is this a viable solution? Take Nigeria, for example. Their latest $2.5bn loan from the World Bank has pushed their debt obligations beyond $110 billion. While this may seem like a step in the right direction, the reality remains grim. With the Naira rapidly depreciating and the economy worsening, the loan repayments, which are due in Western currencies, will skyrocket. Calculations estimate that Nigeria may repay more than $25bn over the 30-year term. Nigeria seems to have rested their head on a guillotine, but we won't know for sure until the loan becomes payable in 2034. The term “original sin” was frequently mentioned at the conference, and Nigeria is just another example. Is debt financing Frontier Markets merely a plaster for a bullet wound? #EmergingMarkets #GlobalFinance #EconomicTrends #AssetManagement

A recent article in the Daily Investor delves into the trends shaping portfolios and financial decisions among some of South Africa's affluent markets. From structured investments offering stability to offshore diversification and the allure of private market opportunities, this piece provides valuable insights into the evolving landscape of wealth management in South Africa. The Insurance and Asset Management business line within Standard Bank Group is proud to offer our clients these investment options to ensure their financial futures are secure. To find out more, read the full article here: https://lnkd.in/eeMUCvaB #InItWithYou

Africa is back on the map for equity investors! A vast and largely untapped region, Africa has, for many years, been heralded as the final frontier when it comes to economic and investment opportunities. Key drivers such as its youthful demographics, increasing urbanisation, consumer demand and ongoing opportunity for technological innovation have buoyed expectations for its economic outlook. However, in recent years, the number of challenges facing the region have hindered investor sentiment. For the last four years, Africa has experienced strong headwinds driven by currency devaluations, which have blown away the positive earnings growth and dividends African companies have achieved over the past decade. During this period, the MSCI Africa (excluding South Africa) benchmark has gone nowhere in dollar terms and even if you invested in some amazing businesses, the returns got smashed by currency movements. What the last 10 years have taught us is that currencies matter. More than most think. The currency moves in the largest four markets reflect challenging positive dollar returns. The Nigerian currency lost 88% of its value in 10 years and Egypt lost 85%. Over the same period, the South African rand declined 44%, and Morocco’s dirham is off around 20%. The post-Covid sentiment on Africa has evolved to look very different to 10 years ago, with many investors turning to other regions, having underestimated Africa’s foreign exchange risks, which comprise both volatility and liquidity risk, as well as risk of repatriation. But the tide is turning. For the short to medium term, we expect a stable currency exchange across Africa – and even the possibility of currency gains. This will allow returns to be driven by dividends, growth and rating change. #africa #investment https://lnkd.in/gkN8Rcvt

[The Future of Bonds in Nigeria’s Capital Markets for Investors] Nigeria’s capital markets currently showcase a diverse array of investment opportunities. Investors can find . . . https://lnkd.in/dMQcMn_e

The Nigeria government has issued $2.2 billion bonds in 2 tranches, with a 6.5 year bonds coupon at 9.625% and a 10-year bonds coupon at 10.375%.  The bonds issue received more than $9 billion of orderbook.  Read - https://lnkd.in/gDt6w-Yc follow Caproasia | Driving the future of Asia The Nigeria government has issued $2.2 billion bonds in 2 tranches, with a 6.5 year bonds coupon at 9.625% and a 10-year bonds coupon at 10.375%.  The bonds issue received more than $9 billion of orderbook.  Announcement (2/12/24): “Nigeria is pleased to have attracted a wide range of investors from multiple jurisdictions including the United Kingdom, North America, Europe, Asia, Middle East and participation from Nigerian investors, which it views as an expression of continued investor confidence in the country’s sound macro-economic policy framework and prudent fiscal and monetary management.  The transaction attracted a peak orderbook of more than US$9.0 billion. This underscores the strong support for the transaction across geography and investor class. With respect to investor class, demand came from a combination of Fund Managers, Insurance and Pension Funds, Hedge Funds, Banks and other Financial Institutions.”

Having less than N500,000 in your account is not the same as owning less than N500,000 in liquid cash/equivalent. Cash doesn’t disappear, it simply changes hands. It could be held in hand (not bank). It could also be held by corporates in trust for your investment. Note, what was reported is what is held in individual account, not corporates like investment clubs, individual company account e.t.c. Looking at it proportionally, with the numbers of existing small and medium enterprises plus the recently reported employment rate in the country, it is highly unlikely that just 5% of Nigerians “own” N500,000. It is more likely, that Nigerians are smart investors!

Islamic Financial Intermediaries vs. Islamic Investment Funds: A Comparison Islamic financial intermediaries (e.g., banks, microfinance institutions) and Islamic investment funds both drive economic growth, but their impact varies. Intermediaries empower individuals and small businesses by providing Shariah-compliant financing, directly addressing poverty and promoting financial inclusion. In contrast, investment funds focus on wealth creation through ethical investments, indirectly contributing to development by funding large-scale projects and creating jobs. Key takeaway: Intermediaries are ideal for grassroots empowerment, while investment funds excel in driving large-scale economic progress. A combined approach can maximize impact in Africa’s development journey.

𝗧𝗵𝗲 𝗡𝗲𝘄𝘀: Ghana's international bondholders have approved the government's restructuring proposal by an overwhelming 98.6%. The proposal, agreed in principle this summer, includes two new bonds: the Disco (short for Discounted) and the Par. The Disco bond faced a 37% haircut in the restructuring, while the Par bond avoided a haircut but will have a much lower coupon compared to Disco and a longer maturity. 𝗧𝗵𝗲 𝗩𝗶𝗲𝘄: This is another successful Emerging Market sovereign restructuring this summer, which bodes well for the market overall. There are still two outstanding restructurings in their final stages: Sri Lanka and Ethiopia. We've already seen Zambia and Ukraine complete successful restructurings this summer—a very busy summer indeed. Hopefully, these restructurings will coincide with a U.S. Federal Reserve rate-cutting cycle, which could provide a tailwind for these vulnerable economies. As investors, we focus on the long-term potential for credit rerating in these post-default cases. Along with more stable global interest rates and productive reforms by these governments, the prospect of improving credit metrics in these countries is increasingly likely. What are your thoughts on the future of sovereign debt in emerging markets? I’ll share the link to the full Bloomberg News article in the first comment! Feel free to share your insights in the comments below. #EmergingMarkets #SovereignDebt #InvestmentStrategies #DebtRestructuring