There is a possibility African stock exchanges will begin attracting offshore investors as foreigners move to guard against huge losses.

Foreign investors showed their interest in African bourses long before the financial crisis struck the US.

One person is very optimistic about this happening. Chief Executive of Uganda Stock Echange (USE) Simon Rutega says Africa’s markets are not correlated with the ones in advanced economies of US and Europe, thus they offer fertile ground for investment diversification to the offshore investors. This will contribute to the growth of local markets.

Uganda’s companies listed on the USE have been performing well despite the turmoil in the world financial markets.

Rutega however said the local financial markets are under stress. "People are still worried about what is going on in the financial markets in US and Europe, this has contributed to a slow down in market activities locally, although we stand to benefit in the medium term as foreign investors channel their investments in the market."

There has been a considerable development in the African securities markets since the early 1990s, and over 22 stock exchanges currently exist in the continent.

The market capitalisation of South Africa’s Johannesburg Stock Exchange, the biggest in the continent, grew to US$886 billion during the fourth quarter of 2007. Egypt and Nigerian stock exchanges rank second and third respectively. At the beginning of 2008, the three bourses held a combined market capitalization of more than $1.118 trillion.

The combined number of listed companies for all stock exchanges in Africa grew from about 1786 in 2005 to more than 2000 in 2008.

Studies conducted by the Brettonwood Institutions show that despite the problems of small size and low liquidity, African stock markets continue to perform remarkably well in terms of return on investment.