How To Invest In African Bonds?

By Author: Jamie Welsh
Total Articles: 64
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Bond market in Africa is one of the most profitable field where you can invest your money. It is actually the key to Africa's financial independence. It should be a part of your choices of what area to invest in Africa. Despite the possible risks, Africa's bond market is offering enormous potential rewards. It provides portfolio diversity wherein their returns are not closely related to traditional asset classes. Another factor that increases the potential of Africa's bond market is that richer countries might have a chance of rapid growth which definitely enhances returns.

Bonds is a financial market where participants buy and sell debt securities. It is always considered as simple and plain boring if compared to equities or stock. Equities represent a share of ownership in a corporation. But ideally, bonds can provide a level of stability that equities cannot match. Bond funds can provide stable source of income, something that is a challenge to overcome in an African investment.

Some African countries were cited as one of the world's new generation of emerging markets. If you want to invest in emerging market ...
... bonds, there are a lot of options. You can do it individually, or as a part of an institutional investor, government or traders. Types of bond markets are corporate, government agency, municipal, mortgaged backed, asset backed and collateralize debt obligation.

You should also take accounts of risks in an emerging market. Risks in investment in a developing country bond is entirely different in emerging market bond investment. Debt risks in the latter is assessed by rating agencies that measure each developing nation's ability to meet their obligation. The most common risk in a bond is the interest rate risk. Bond prices will fall if interest rates rise. In Africa, interest rates have a tendency to fluctuate because of different inevitable challenges like exchange rate's jumpy status and currency devaluation. The rate of dollar versus the local currency can positively or negatively affect your yield. When the local currency is stronger against dollar, then your yield will rise, but it goes the other way, your yield may drop. If you don't want to get involved in this kind of risk, then invest in bonds that are dollar dominated or issued only in U.S. dollar.

Risks among bond investments in African countries also includes the standard risks such as the variables of the issuer's economic or financial performance and the ability of the issuer to meet payment obligations. However, financial system in Africa has highly improved since the start of the 21st century. With this, investors can have somewhere to run to when the greater amount of financial needs come.

Although most emerging countries, like countries from Africa have made a tremendous effort in limiting country risks, the chance for economic instability is still high.

African markets have found their place in the global field of investment. If they will continue to grow, opportunities will also expand. All that investors need to do is to look for more knowledge about investing in Africa so they can overcome risks and have a firm hold of its enormous growth opportunities.

Author recommends Invest in Africa and Strategic Business Planning Management Consultants Africa