We have seen many stories about the resurgence of economies and the emergence of stock markets across what used to be called the developing world.
The BRICs are now a familiar part of the investing landscape, and have proved very good investments over the past decade. Then we have had the frontier markets: countries such as Turkey and Vietnam, which until now have been outshone by the BRICs, but which are now strong investments in their own right.
And amongst the frontier markets I would like to concentrate on Africa — a continent that is now growing and developing at quite a pace.
But how should you invest in Africa? Well you could chose a unit or investment trust, but an easier route is to invest in companies listed on the FTSE 100 which undertake much of their business in Africa.
So here are my FTSE 100 plays on the Africa boom.
Standard Chartered
Standard Chartered Bank (LSE: STAN) has had a difficult 2013. It sailed through the Great Recession unscathed, yet recently there has been the Iranian money-laundering scandal, and recent results have shown a slowing of the company’s growth.
Yet this is a company that has strong businesses in growing markets across both Asia and Africa. And the fundamentals of the company are solid: a P/E ratio in single figures, a juicy dividend yield, and a low level of debt. Over the long term, I expect this company to still grow.
The negativity around this company has pushed this company’s share price to bargain levels. I think this has created a buying opportunity, and as investors warm both to banks and to emerging and frontier markets, I expect Standard Chartered to move ahead strongly next year.
Diageo
Drinks company Diageo (LSE: DGE) (NYSE: DEO.US) is a global company that is experiencing strong growth in emerging and frontier markets, including Africa.
Its earnings year-on-year are growing at a rapid rate as it leverages its world-leading brands, such as Johnnie Walker and Smirnoff, across the globe.
As wealth increases from Cape Town to Cairo, consumers are buying more luxury branded products such as those Diageo makes. The emerging and frontier market consumer boom is akin to the post-war consumer boom in the US and Europe. This has led to a share price which has been rising and rising.
This is a long-term trend that Diageo is well placed to benefit from. I think that Diageo will continue to increase profits into the future, and its share price could increase further.
Unilever
Much of what I have written about Diageo I could also write about Unilever (LSE: ULVR) (NYSE: UL.US), the Anglo-Dutch consumer goods company.
Most of Unilever’s products are now sold in emerging and frontier markets, and eventually most of its profits will be made there too. And its business in Africa is steadily growing.
As consumers have increasingly bought more expensive branded products, Unilever’s sales have been booming. Buying into Unilever is betting on the future growth of Africa, and the rest of the developing world.
