Rout could continue after a year to forget: Africa markets in 2019

However, bargain-hunters won’t necessarily jump in next year.  Risks abound from tense elections in the two biggest economies — Nigeria and SA — to low oil prices, potential credit-rating downgrades and the prospect of sovereign defaults.

Here’s what investors should look out for:

Angola

The oil cartel Opec member is desperate to boost an economy that will contract for the third year running in 2018, according to the International Monetary Fund (IMF). This month, its  government signed a $3.7bn three-year loan with the Washington-based lender that it hopes will end severe shortages of foreign exchange, which have forced the central bank to devalue the kwanza by almost 50% against against the dollar since January. State energy company Sonangol, meanwhile, is trying to attract foreign investment in oil fields and increase production that’s at the lowest in about a decade.

Egypt

Its central bank took a big step early this month when it ended a repatriation mechanism guaranteeing foreign-exchange availability for overseas investors. This will leave the Egyptian pound more exposed to market forces next year as bond and stock traders switch to using the interbank market. Their response so far has been “extremely positive” and few are exiting their positions, according to Citigroup, which recommends that clients buy three-month T-bills yielding almost 20%. With a fiscal deficit of about 10% of GDP, Egypt needs the investment.

Ethiopia

Abiy Ahmed has pledged a raft of reforms since becoming prime minister in April, including opening up the telecommunications and power industries to private investors. This could further boost an economy the IMF reckons will grow 7.5% this year, the most in Sub-Saharan Africa. Still, foreign-exchange shortages are acute, putting pressure on the birr. Issuing another eurobond would increase the Horn of Africa nation’s low reserves, but the IMF warned this month that it’s at high risk of debt distress.

Ghana

West Africa’s second-biggest economy is set to exit a bailout programme with the IMF at the end of this year. This has helped fix the nation’s finances and drive the inflation rate down to its lowest since 2013. Still, investors are wary about the finance ministry’s plan to sell billions of dollars of century bonds and hope it isn’t a sign the government will revert to unsustainable spending without the guiding hand of the IMF.

Kenya

With growth of about 6% expected next year, the Kenyan economy remains one of Africa’s most buoyant. But Moody’s Investors Service has warned about the government’s rising debt levels and said it will probably reach 60% of GDP in the medium term. The IMF has also said that, due to central bank meddling, the shilling is almost 20% over-valued and no longer a floating currency, which governor Patrick Njoroge has denied.

Mozambique

The country may have been in default for almost two years, but its eurobonds are the best performers in emerging markets in 2018, making a price return of 15%. Much of this is down to the government agreeing, in principle, a restructuring deal with most of its bondholders. If other investors give their consent early in 2019, it could pave the way for Mozambique to get an IMF bailout.