Deutsche AM sees value in SA, Kenya and Egypt
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Deutsche Invest | Africa, a €85m Pan-African equity fund, favors South Africa, Kenya and Egypt, according to Sebastian Kahlfeld, Senior Fund Manager at Deutsche Asset Management (Deutsche AM).
Deutsche Invest | Africa, a €85m Pan-African equity fund, favors South Africa, Kenya and Egypt, according to Sebastian Kahlfeld, Senior Fund Manager at Deutsche Asset Management (Deutsche AM).
Kahlfeld said: “In South Africa there are very good and attractively valued companies. By far, South Africa is the best equity market you can find in Pan-Africa.”
He added that while South Africa is not so much of a pure African story, Deutsche Invest | Africa is bullish on Kenya as it likes the “infrastructure developments in Kenya”.
“Egyptian corporates are relatively solid and performed well. Although there are still issues on the currency front, we like that the Egyptian Government is taking into account what foreign institutions have to say,” Kahlfeld told Africa Global Funds.
Kahlfeld predicts that there will be further currency depreciation in Egypt, adding that this shouldn’t be a problem for equity investors.
“Equity markets in Egypt are quite liquid. There are many defensive FX earning stocks and real estate companies, for example, will do really well. In Nigeria in comparison companies are very illiquid,” he said.
Deutsche Invest | Africa has less than 1% in Nigerian stocks, whereas South Africa accounts for 29.8% allocation, Egypt for 21.4% and Kenya for 13.8% allocation respectively.
The top five holdings in the Fund are: Naspers (9.5%), Old Mutual (6.5%), East African Breweries (5.7%), KCB Group (4.6%) and Commercial International Bank Egypt (4.3%).
In regards to Nigeria, Kahlfeld said that banks in the western African economy are continuing to struggle.
He added that the low-oil-price environment and authorities’ willingness to maintain an artificially-strong Naira drove GDP to decelerate in Q4 to levels last seen in 1999.
“In order to attract capital we need to see the stabilization of commodity prices. Once we see things clear up, investors will look at these markets again,” he said.
Deutsche Invest | Africa was launched in 2008 and since 2011 has been managed by Kahlfeld.
The Fund is not index benchmarked and constructs portfolio agnostic of market capitalization and index weightings.
“We want to see value materialize. There are enough countries to choose from in Africa,” said Kahlfeld.
The Fund has a mix of institutional and retail investors, and according to the fund manager has a “committed investor base”.
“There are investors who believe in the African growth story,” said Kahlfeld.