Africa and Middle East - the next big thing?

I first heard about Africa and its economy from Nicholas Vardy when I attended the Money Show in Washington DC sometime back. Although impressed by the talk and the numbers, I somehow kept postponing blogging about it. Turns out, the African investment has yet again been endorsed by another major source - T. Rowe Price's newly launched Africa and Middle East Fund (TRAMX). Both these sources remain bullish on Africa (T.Rowe on Middle East as well), and the numbers justify their bullishness.



African economy highlights:

• African economy is currently benefiting from its natural resources like oil and gas, an increase in commodity prices, debt forgiveness and increasing political stability
• Excluding South Africa, the sub-Saharan African has averaged a growth of 7% over the last 5 years
• Excluding India and China, Africa is growing faster than Asia
• Between 1995 and 2005, African stocks showed compound annual growth of 22%, with equity growth for 2006 in Kenya, Morocco, Uganda and Botswana being 46%, 75%, 69% and 55% respectively
• China has been trying to improve its relationship with Africa (from a selfish angle of-course, to get their natural resources). Trade between China and Africa soared to $55 billion last year

Middle-Eastern economy highlights:

• The rising oil prices in recent years has produced strong economies in the Middle East which include countries like Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates
• Real GDP growth for the GCC countries has been 6% in 2006
• Governments of these countries are opening up their economies to reduce their dependence on oil prices, led by Dubai with several high-profile projects in infrastructure, financial services and tourism

T.Rowe Price Africa & Middle East Fund highlights:

• The primary markets the fund invests in include Bahrain, Egypt, Jordan, Kenya, Lebanon, Morocco, Nigeria, Oman, Qatar, South Africa and UAE
• Other potential markets include Algeria, Botswana, Ghana, Kuwait, Mauritius, Namibia, Tunisia and Zimbabwe
• The fund has a high risk/return profile since it can invest in small and mid-cap stocks has has a relatively concentrated portfolio consisting of 30-40 companies
• Financial companies represent the largest sector exposure, as commercial banks are benefiting from rapidly growing economies.
• The fund also plans to focus on companies related to infrastructure spending, and also from wireless telecommunications
• No-load fund with an expense ratio of 1.75%
• Current NAV: $12.07, P/E: 14.9, Earnings growth rate: 12.1
• Country details:

• Sector exposure:

This is a high-risk/high-return investment and serves those investors whose goals are so aligned. If the African and Middle Eastern market continues to grow significantly, this investment will provide great long-term returns.

Voluntary Disclosure: I currently do not own the T.Rowe Price Africa and Middle East Fund. Various sources referred for this article include the T.Rowe Price Investor Report, Seeking Alpha etc.