STREET DOGS

From Victor Hill at Master Investor: Africa has long been the Cinderella of the emerging markets. But there are now three short-term trends at play to the benefit of leading African markets in 2018.

One: African nations – together with other emerging markets – are benefiting from the Synchronised Global Recovery.

The World Bank report on the state of the world economy, issued on the eve of the annual gathering of plutocrats in Davos, could not have been more bullish.

Global growth is predicted to rise 2.7% in 2018 on … a recovery in manufacturing and trade, improved market confidence and resurgence in commodity prices.

Two: Commodity prices are trending upwards as the dollar falls. On January 25, the Bloomberg Commodity Index edged up to a two-year high. It was up 10% since mid-December 2017. A weaker dollar, combined with expansionary global economic conditions, is driving this. Oil prices are also on the up, with the exception being the palm oil price which was down about 20% in 2017. However, agricultural commodities are rising.

Three: Default rates on emerging markets debt are down to record lows – and African borrowers are sound. The number of governments in default to private creditors has fallen to the lowest level since 1977. There is a school of thought that some sovereign defaults may in fact be hidden – by China. But the real reason why the sovereign default rate has fallen is that emerging economies increasingly borrow in their own currencies.

Of 54 economies followed by the consultancy Oxford Economics, only 11 have foreign currency bonds outstanding amounting to more than 20% of their GDP – and none of them is African. Maybe we should call Africa the Bright Continent for that would better describe its future.