Although the mainstream media tries to spin it positively, the recent volatility in U.S. markets is a serious concern. Since the beginning of March, the benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY) has gone absolutely nowhere. Established international indices are taking their cues from us, making it difficult to seek out alternative investments. However, one sector has weathered the storm fairly well — African stocks.
Right off the bat, we need to establish the fact that African stocks are speculative. Presently, volume is limited due to a lack of popularity and political tensions that have rippled across the continent. With that said, adventurous investors have set their sights on Africa for a number of substantive reasons.
Primarily, African stocks represent the last frontier market. If you tried to sell someone on China as the “next big investment play,” that person will laugh at you. China has been on the news almost on a daily basis, and Chinese financial opportunities are a dime a dozen. But mention the Asian giant during the 1990s, and you’d probably get a quizzical look.
This is the allure of African stocks. The continent really represents the final chance to get on board a China-like investment before it becomes a valuation monster. The facts back up the bullishness.
The African region has nearly 1.25 billion people, making it the world’s second-largest people group. At the same time, the internet penetration rate is less than 28%, the lowest rate globally. With efforts towards education and technological innovation, this rate has the potential to change dramatically. Even a modest impetus could make Africa a serious contender in trade and commerce.
Of course, African stocks have largely been buoyed up to this point by the continent’s vast natural resources. The region is literally and figuratively a goldmine. Unfortunately and inevitably, this has led to a constant scourge of exploitation.
I’m hopeful, however, that with strategies towards open markets, transparent governments, and higher education standards — particularly for women — the entire continent can participate in the global economy under their terms. That, in my opinion, is the true opportunity in Africa.
Here are three African stocks that may provide a rich alternative to the usual.