LONDON Jan 28 Many of the frontier economies in
Africa and the Middle East may be growing rapidly, but they are
still getting short shrift from global investors.
They are attracting less than 1 percent of a typical global
equity portfolio and barely registering when it comes to bonds,
Reuters polls of leading investment houses showed on Thursday.
Specifically, just 0.7 percent of equity flows in a balanced
portfolio were allocated to the Middle East and Africa while
bond allocations to the region averaged just 0.1 percent.
The results were gleaned from responses by 44 major fund
management companies in the United States, continental Europe,
Britain and Japan.
They come despite signs that Africa, for one, is likely to
grow rapidly over the next few years.
Growth in sub-Saharan Africa will be 1 percentage point
above the global average this year, according to the
Internationa Monetary Fund, which also puts eight African
countries in its top 20 fastest-expanding economies in 2010. See
Davos Special Report [ID:nLDE60H117]
But for global investors the issue is as much about supply
as it is demand. Many countries in the Middle East and Africa
simply do not have a sophisticated enough capital market.
"It is not just the economy that needs to emerge but the
financial structure," said Wayne Bowers, international chief
executive officer of U.S. fund firm Northern Trust Global
He also said that investors were put off the region by a
lack of liquidity in what markets there are. "It may be easy to
buy," he said, "but how easy is it to sell."
This may well be why other energing and frontier regions do
much better in terms of investment flows.
The polls showed 7.8 percent of equity holdings among the 44
firms to be focused on Asia (excluding Japan), 2.2 percent on
Latin America and 2.0 percent on emerging Europe.
For bonds, Asia ex Japan was 1.3 percent, Latin America 1.0
percent, and emerging Europe 1.4 percent.
The Reuters polls, meanwhile, show something of a divergence
among investors when it comes to the Middle East and Africa.
Japanese investment houses held the highest exposure to the
region in both stocks and bonds -- 0.8 percent and 0.3 percent
This is most likely a reflection of Japan's traditional
focus on searching for yield. South African rand-denominatd
uridashi bonds are popular with Japanese retail buyers and yield
8 percent for example.
By contrast, U.S. investors were the least interested in the
region, with 0.4 percent exposure to stocks and, along with
Britain and Europe, none to bonds.
(Editing by Andy Bruce)