Emerging Foreign Investment Flows May Double: Time to Invest?

Money out of a plastic pipes    This could be the time to invest in emerging market countries, of which South Africa is one. (Some also mention Nigeria as an emerging market country, but it is still arguably a frontier market one.)

“Foreign investment in emerging markets should double this year to $550 billion compared to 2015, despite local selling pressure and Brexit, according to the Institute For International Finance.”

“In its July report,  the group explained its reasoning behind why emerging markets will remain attractive to foreign investors. Here are eight important assumptions from the institute’s lengthy report, and comments from the release on profitability and country exposure:

  1. Investors want yield and that is a key driver for emerging market capital flows.
  2. Brexit could intensify appetite for emerging market growth.
  3. EM economic growth is in a gradual cyclical recovery.
  4. The U.S. Fed is unlikely to produce hawkish policy surprises, which would draw investors to U.S. yields from EM yields.
  5. China is likely to avoid a disorderly movement in its currency, the renminbi, in order to keep short-term growth in line with its target, despite the resulting slowness in structural reform and high-and-rising debt levels.
  6. Brexit is likely to have a muted impact on emerging markets except those in Eastern Europe.
  7. Stabilization of commodity prices should benefit EMs, with oil prices to remain around the $45-50 per barrel in the third quarter.
  8. EM valuations are attractive.”

Many South African-based multinationals are already in and/or expanding into other parts of Africa.  This could be a good time to look at them. We’ll keep you posted!

8 Reasons Emerging Foreign Investment Flows May Double: http://blogs.barrons.com/emergingmarketsdaily/2016/07/14/8-reasons-emerging-foreign-investment-flows-may-double/2/

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