Guess Who Outperforms World in Coronavirus Mayhem
(Bloomberg Opinion) - Covered by the myriad stories of global corona virus destruction, three headlines are on the continent with no shortage of epidemics, man-made disasters, and natural disasters. That would be Africa. Of the 54 countries, six are among the ten fastest growing economies in the world this year. The continent is the most popular bazaar for equity appreciation after Eastern Europe and has one of the best performing sectors on the stock exchange: communication.
Africa has fewer Covid 19 cases than other densely populated regions. Even after testing tripled to 1.2 million, the director of African Centers for Disease Control and Prevention, John Nkengasong, said the percentage of the continent was relatively low. According to a report by the Financial Times on April 28, Africa has the largest proportion of youth in the world, a higher average temperature and most of the time relatively more people outdoors.
Although South Africa is still an outlier and daily Covid-19 infections are rising similarly to the United States, Ethiopia, Kenya and Nigeria reflect the low percentage of cases relative to the population, according to Bloomberg News and the Johns Hopkins Bloomberg School of Public Health of the continent. Even if the daily infection rate in the United States drops due to the population decline, the measure is still 24 to 46 times higher than in Ethiopia, Kenya and Nigeria.
The trend has its roots at the beginning of the 21st century, when another pandemic threatened much of the world. Since the onset of Severe Acute Respiratory Syndrome (SARS) in 2002-2003, when the continent's only infection was in Cape Town, Africa has overtaken Bloomberg with a steadily growing share of global GDP in industrial GDP.
Most recently, 38 economists contributing to Bloomberg have lowered their 2020 forecasts for the world from a growth rate of 3% to a decline of 3.7%, while forecasting a much less steep decline for Africa: from 3% growth to a decline of 2.5%. If these forecasts prove correct, according to Bloomberg, Africa would be in half a dozen of the top 18 best performing regions in 2020.
Africa dominates the list of countries that are expected to grow the most in 2020. Rwanda is forecast according to Bloomberg with 3.2%, Ethiopia and Ivory Coast with 3%, Uganda with 2.8% and Ghana with 1.9%. This explains why stocks from North America, Western Europe and the Asia-Pacific region contributed 3, 2 and 1 percentage points to the 8% loss in the world benchmark and Africa contributed only 0.24 percentage points to the deficit. According to Bloomberg, it remains the region with the best performance, similar to Eastern Europe (0.2 percentage points).
While the world stock benchmark declined 4% in 2020, Africa lost only 1%. Communication companies in sub-Saharan Africa have led all industries in Africa so far this year with a total return (income plus appreciation) of 22% - more than twice as much as the 9% that global healthcare companies, the number 1 in the industry, achieve the world.
Africa's appreciation in the stock markets coincides with a similar continent recovery in the emerging government debt market. According to the Bloomberg Barclays indices, African public debt has risen by 24% or more than twice the 10% of the total market since early April, much of the past two years.
None of these achievements appear to have been expected from some of the largest investors retiring from emerging markets earlier this year when the corona virus became a global pandemic. BlackRock, the largest $ 7.4 trillion money manager, saw its African investment drop 24% to $ 8.3 billion. Investments in the Asia-Pacific region fell 20% to USD 115 billion, and valuation in Eastern Europe fell 31% to USD 9 billion, according to Bloomberg.
All of this shows that Africa is the greatest economic and financial surprise in these dangerous times.
- With the support of Shin Pei, Richard Dunsford-White and Amine Haddaoui.
This column does not necessarily reflect the opinion of the editors or Bloomberg LP and its owners.
Matthew Winkler, emeritus editor-in-chief of Bloomberg News, writes about markets.
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