Investment Flows

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A year after public protests threw Egypt into turmoil, the country?s stock market rose to a six-month high on Feb. 12 after a nationwide strike failed to gather support and France Telecom began talks to boost its stake in a local mobile-phone company.
The turnaround in Egypt represents the attractiveness of emerging economies in places like Africa and the Caribbean. In early February, investors poured $17 billion into U.S. funds targeting emerging market securities and high-yield bonds on optimism that Greece would find a solution to its debt crisis, says EPFR Global, a Cambridge, Mass.-based fund tracker. ?People are growing more confident in the market,? one analyst told Bloomberg News. ?The possible acquisition of Mobinil by France Telecom also supports the positive sentiment especially for local institutions that see cash coming back into the market.?

In South Africa, the government is ramping up spending on railways and roads to lure mining investment as it fights off calls from within the ruling African National Congress to nationalize the country?s mines. State-owned rail and port operator Transnet will spend $40 billion over seven years to expand capacity in iron ore, coal and manganese export lines, President Jacob Zuma told lawmakers in his state-of-the-nation speech. His rejection of nationalization laid to rest two years of debate that damaged South Africa?s image as an investor-friendly emerging market.
Investor sentiment is improving in the Caribbean, too. Oil companies in Trinidad and Tobago are expected to invest $3 billion in exploration this year, bringing to life resource development after a brief lull. In Jamaica, improving macroeconomic stability and a high level of institutional strength have allowed the government there to respond to significant fiscal and balance-of-payments pressures over the past year, according to Fitch Ratings. Jamaica now compares favorably with peers in terms of gross domestic product or GDP per capita. The central bank has been able to maintain and even reduce interest rates to historically low levels, helped by exchange rate stability and reduced inflationary pressures. The new government of Portia Simpson-Miller intends to negotiate a new agreement with the IMF this summer and to tighten spending while moving forward with tax reform. It also wants to bring public sector salaries under control and contain rising pension costs.
One of the few places where growth is doubtful so far is Nigeria, where an increasingly violent insurgency by Islamist sect Boko Haram is diverting money away from needed infrastructure spending and could be costing as much as 2 percent of the country?s economic output.???