Looking for value in emerging and frontier markets? Kenya and Nigeria may be just the ticket, according to asset manager Advance Emerging Capital.
As well as robust population growth, the two countries have the highest medium-term gross domestic product growth rates of all countries in sub-Saharan Africa, the investor says in a report published on Monday.
Nigeria, in addition, has recently overtaken South Africa as the continent’s largest economy.
In April, the most comprehensive set of data since 1990, showed that nominal Nigerian GDP reached $510 billion in 2013, a chunky $190 billion more than South Africa’s slow-growing economy.
“We view Nigeria and Kenya as two of the most attractive frontier markets over the next five years. The macroeconomic and demographic drivers of both countries are extremely compelling,” said Andrew Lister, co-chief investment officer of Advance Emerging Capital. Based on what he describes as attractive valuation levels of the two markets, he says now is an excellent time for investors to put money into these markets.
Advance Emerging Capital also says Kenya’s middle class has the highest proportion of entrepreneurs of any frontier market, and is rapidly developing as a regional hub for both information technology and energy companies.
In debt markets, the county appears to be on the brink of issuing its first international bond, amid renewed appetite for emerging-market assets. The Kenyan government has said it hopes to raise about $1.5 billion with the bond, which would make it one of the biggest dollar bonds ever sold by an African country.
Bank of America Merrill Lynch, too, has pulled together some data that it says backs up case for investing in the two nations. According to BAML, stocks in both Nigeria and Kenya trade at relatively attractive price-to-earnings ratios. Nigerian listed companies’ earnings growth in 2014 is forecast at a healthy 13.6% while Kenya’s companies’ earnings this year are expected to grow by 19%.