According to Stuart Culverhouse,the chief economist and global head of research at Exotix Partners, Kenya would be better received by sovereign bond investors than Nigeria because of its lack of commodity exposure.While speaking to Bloomberg’s James Crombie and James Batty on July 22, Stuart recommends investors to be cautious on Angola, Zambia and Ghana.
Exotix echoes Moody’s earlier comments in Nairobi about the diversity of Kenya’s economy which makes it more resilient and attractive due to the country’s diversification across a number of industry sectors with low exposure to mining, oil and gas activity. Kenya is expected to remain buoyant in the next 12-18 months, despite the backdrop of slowing growth elsewhere in sub-Saharan Africa, primarily in commodity exporting economies.
READ; “Kenya’s middle Class growing but small Percentage of the population” Moody’s
Here is an extract from the interview;
Q; Who would be well-received by the Eurobond market this year?
Stuart; Nigeria and Kenya will probably attract more interest because of their profile. Nigerian Eurobonds could be interesting considering the government’s fairly low leverage. Nigeria’s 2023 Eurobond yield of 6.5 percent is not particularly exciting in the grand scheme of things, but it’s not too bad compared to Brazil for example. Kenya will probably be higher in yield terms just because it trades higher than Nigeria. We think that is the better story from the lack of commodity dependence argument.
Stuart says that investors should be wary of Ghana despite the fact that its economy has improved under the IMF program, this is because of the upcoming presidential election and in Exotix’s views, Ghana should be issuing at prevailing 10 percent yields.
“Investors may also be cautious on Ethiopia and Egypt, the former because of low reserve cover and vulnerability to agriculture, and the latter because of its high debt burden and the secular decline of support from the Gulf. More generally, we think the experience of Mozambique suggests investors should be more questioning of debut issuers, particularly those with low income levels, and more critical of the use of proceeds from bond sales.”
