Africa depending on foreign portfolio investors dangerous

MTN Group President and Chief Executive Officer (CEO) Ralph Mupita has cautioned that it is dangerous for African countries not to depend on foreign portfolio investors.

In his assessment, foreign portfolio investors take investment decisions based on vagaries of the changes in economic situations and different views.

According to him, African needs long-term and committed capital which foreign portfolio investors do not offer.

Foreign portfolio investors with higher risk sensitivity as anxiety builds over geopolitical events, tighter monetary conditions, rising inflation, and fears that many economies will not recover quickly enough from the pandemic continue to flee emerging markets.

Speaking to journalists in Accra, Mr Mupita said even though MTN Group is doing well, the Group’s share price is going down.

He attributed the situation to global sell-off of emerging market stocks, and this is reflected in MTN Group share price decline.

He explained that foreign portfolio investors in developed markets are just selling emerging market stocks indiscriminately.

Also, he averred that the consequences of the Ukraine crisis resulted in a flight to safety, which goes to the advantage of the dollar.

In his view, the foreign portfolio investors are not looking at whether the stock being sold is quality or bad.

The MTN Group President and CEO, therefore, stressed that foreign portfolio investors are just selling stocks indiscriminately irrespective of the quality of the stock.

He is convinced that this indiscriminate sell-off is responsible for declining the share price of MTN Group as well as MTN Ghana share price.

Mr Mupita is hopeful that the MTN share price will recover to its fair valuation.

He pledged that MTN is committed to driving financial inclusion to give people dignity and hope.

He called for corporates and individuals who are committed to the development of the continent.

The MTN Group President and CEO said Africa needs long-term and committed capital which MTN offers to ensure effective development of the continent.

Persistent and elevated inflation around the world placed pressure on central bankers, including the Fed, to brace markets for an accelerated pace of monetary tightening and caused a significant sell-off across fixed income markets

Russia’s invasion put emerging markets debt in the crosshairs of a crisis, causing the asset class to suffer one of its worst drawdowns in recent history and underperform nearly all other fixed income markets.

Investors began to pull money from emerging markets debt in last quarter of 2021, and the pace of outflows has accelerated in 2022.

Since then, investors have withdrawn around $21 billion from the asset class, including over $14 billion since the start of the year.

Nearly all of the outflows since the start of the year have been from hard currency debt, which has suffered the steepest losses.

The nearly $13 billion in hard currency redemptions in the first quarter is the second worst quarterly outflow in absolute terms, trailing only the COVID-19 crisis in the first quarter of 2020

The key risk for emerging markets debt as an asset class is the degree to which the conflict slows global growth, ratchets up inflation, and tightens global financial conditions.