BusinessEconomy

CEO of RMB: Africa not immune to “all-asset” sell-off but could present opportunities

Africa’s hard currency bond markets are effectively closed at the moment and limited funds are being raised internationally

Africa is not immune to the ‘all-asset’ sell-off that markets are experiencing but when the dust settles investors may find good opportunities on the continent says Martin Richardson, CEO of RMB in London.

“Currently we are seeing a rare, synchronised sell-off of all assets. Typically during periods of extreme volatility we would see stocks fall but bonds rally as investors seek safe haven assets. But now all assets are selling – from stocks to bonds and even hard assets like property and gold.

“The easy money printing excesses of the past years is unwinding as investors are now once again more sober and stringent in assessing assets’ true value.”

Richardson added that as the world faces a global recession, some African sovereigns may have to restructure their debt.

“Africa’s hard currency bond markets are effectively closed at the moment and limited funds are being raised internationally. However, when the markets do re-open they will be offering materially higher yields and potentially better returns for investors.”

The perfect storm of inflationary pressures, aggressive monetary tightening from central banks, combined with a deepening of the Russia/Ukraine crisis, has made capital raising via traditional bond markets particularly expensive for African countries whose governments have been forced to find innovative ways to raise capital.

He added that the one fortunate current dynamic is that African Eurobond maturities over the next few years are relatively manageable and is a sign of market maturity as borrowers have actively managed their liability profiles.

“As African debt markets reopen, hopefully in 2023, we may see an incremental shift to less liquid private debt investments into African companies. This will be an opportunity for some investors as there are African companies which will be relatively unaffected by a potential global downturn.

“It is likely that a global recession will trigger a material local currency depreciation in specific African countries, however this is also worth monitoring as it may provide interesting opportunities, as currency markets often overshoot fundamentals.”

Richardson added that there are a number of international government agencies who are willing to support the African continent during the tough times that lie ahead and that we should expect more structured transactions which assist in reducing certain credit and market risks.

“Once equity markets stabilise over the medium term, we may observe a resurrection globally of convertible bonds which helps keep the debt more affordable by keeping the coupon interest rate low. But in Africa, unfortunately there are only a few large corporates with sufficiently liquid equity market to support a convertible bond issuance, mostly in South Africa.

Convertible bonds are a type of debt security that provides investors with a right to exchange the bond for a predetermined number of shares in the issuing company at certain times of a bond’s lifetime.

The interest rate is typically lower because of potential to convert debt to equity at favourable terms.

Asaase Radio 99.5 broadcasts on radio via 99.5 in Accra, 98.5 in Kumasi, 99.7 in Tamale, 100.3 in Cape Coast and on our affiliates Bawku FM 101.5 in Bawku, Beats FM 99.9 in Bimbilla, Somua FM 89.9 in Gushegu, Stone City 90.7 in Ho, Mining City 89.5 in Tarkwa and Wale FM 106.9 in Walewale
Tune in or log on to broadcasts 
online: www.asaaseradio.com, Sound Garden and TuneIn
Follow us on Twitter: @asaaseradio995
Live streaming: facebook.com/asaaseradio99.5. Also on YouTube: Asaase Radio Official.
Join the conversation. Call: 020 000 9951 or 059 415 7777. Or WhatsApp: 020 000 0995.

#AsaaseRadio

Show More

Related Articles

Back to top button

Adblock Detected

ALLOW OUR ADS