Could it be that rock bottom interest rates in the developed world are finally driving money into Africa?

Corruption, bureaucracy and uncertainties over debt restructuring all remain as barriers to investment in Africa, but overall the climate is improving, at least according to emerging market specialists who gathered recently at Thomson Reuters’ London headquarters for panel discussions on African investment.

There has been a lack of both opportunity and willingness for international investors to get back into Africa, after many pulled out as a result of the global financial crisis.

But that is starting to change as minimal interest rates in developed countries once more propel investors to higher-yielding, growing economies.  Michael Hugman, emerging markets strategist at Standard Bank, told the conference:

The crisis for Africa should be a relatively short-term deviation. People are finally waking up to the fact that OECD countries are offering  little over 1 percent.

Postponed international bonds may once more be on the road, with Kenyan Central Bank Governor Njuguna Ndung’u promising the conference Kenya will launch a planned debut Eurobond next year.

A loan to Angola was likely to be approved this week, delegates from the International Monetary Fund said, adding they were “cautiously optimistic” on Africa’s growth outlook.

However, Africa is unlikely to return to the heady days of 2007, when, according to David Cowan, Africa strategist at Citi, “you could just make up a country in Africa”, assign it a mythical commodity export, and investors would come flocking.

The title of this post is taken from two sources. One was a headline in British tabloid, The Sun, in January 1979, when then-prime minister James Callaghan denied that strike-torn Britain was in chaos. The second was the title of a 1975 album by prog rock band Supertramp that famously showed someone sunbathing amidst the grey awfulness of the declining industrial landscape.

Are we now getting blasé about the latest crisis? Not so long ago, perfectly respectable economists and financial analysts were talking about a new Great Depression. The world was on the brink, it was said. Now, though, consensus appears to be that it is all over bar the shouting. The world is safe.

Wealth managers at Barclays have gone as far as telling their clients to get over it.

Move past the crisis .... The past year's events were deeply traumatic for most investors, but now is the time to move on, and take a more "business as usual" approach ...."

Such bullishness may not be comforting to the record numbers of jobless in parts of the world, but it is bordering on consensus. It is left to the likes of perma-bears such as  Nouriel Roubini to try to burst the bubble of optimism on which many are floating. The economist began one of his latest articles bluntly:

Think the worst is over? Wrong.

Roubini's main point is that unemployment is likely to get worse rather than better and that many U.S. jobs that have been lost will not come back.

Now, there can obviously be a disconnect between markets and economics, but the former tends to be based on assumptions about the latter. So which is right? Are we out of the woods? Or should Supertramp be firing up their keyboards again?

Equities may be the poster child for this year’s market recovery, but corporate bonds have been the runaway outperrfomer.

As the graphic below shows, corporate debt was less volatile and moer profitable over the past nearly three years of crisis and recovery — even “junk” bonds.

This year’s performance for corporate bonds has been stunning. In December last year, the spread between global large cap company debt and U.S. Treasuries was 155 basis points, according to Bank of America Merrill Lynch. It has now narrowed to around 52 basis points.

The performance of high-yield, or “junk” bonds, has been even better. From a spread of 2,193 basis points in December, the BoA-ML global high-yield index now registers 773.

And what now? Investors still like the asset class, but there is evidence that the degree of passion may be cooling.

(Graphic: Scott Barber)

While Japan took few direct hits in the global credit crisis, the aftershocks have been immense, and long-lasting. The United States and Europe may now be showing some signs of recovery, but the world's second-largest economy is still straggling behind and gasping for air.

Predictably, equity markets reflect Japan's wheezy struggle. The Nikkei 225 is the worst performer among the benchmark indexes of the G7 nations, up just 10 percent so far this year. (The best performer, by the way, is Toronto at nearly 27 percent. The Dow has posted a respectable 17 percent return.)

Some discrepancy between Japan and other advanced industrialised nations is to be expected. Tokyo's top companies are largely exporters reliant on the United States, where consumer spending has been whiplashed by the recession. A resurgent yen, which drives up the price of Japanese goods overseas, hasn't helped either.

Consumer spending in Japan -- which never convincingly recovered from the crash of the asset bubble in the early 1990s -- is only poised to get worse, thanks to the lethal demographic cocktail of an ageing population and a shrinking birthrate.

But the reasons behind the Nikkei's poor performance aren't exclusively economic. Talk to a frustrated fund manager in Tokyo (believe me, they are very easy to find these days) and they'll tell you that even with the lousy earnings and a grim economic outlook, the biggest problem now is a rush of capital raisings that will heavily dilute the holdings of current shareholders.

"This is the biggest factor why Japanese shares lag behind U.S. and European shares," says Takeshi Osawa, senior fund manager at Norinchukin Zenkyoren Asset Management, referring to the recent rush by Japanese companies to issue new equity.

Japanese firms have already raised $40 billion through issuing common stock and convertible bonds this year, tapping the modest stock rebound for much-needed cash to replenish their reserves, and it doesn't look like it's going to end.

On Monday, Hitachi said it will raise up to 416 billion yen in a share sale. Shares of Hitachi, Japan's biggest electronics firm by sales, suffered their biggest one-day slide in six months after sources told Reuters about the public issue.

Mitsubishi UFJ Financial Group, Japan's biggest bank, is likely to raise as much as 1 trillion yen by the end of the year, to meet stricter global capital regulations and increase lending in Asia, three sources said on Saturday.

Analysts expect that its smaller rivals Mizuho Financial Group and Sumitomo Mitsui Financial Group will eventually have to follow suit. Shares of Mizuho and Sumitomo Mitsui both fell after news of Mitsubishi UFJ's financial raising, even though the two smaller banks had posted consensus-beating second quarter results.

For investors, who watch in horror as their holdings sharply lose value, and Japan's recovery gets stalled, it is nothing short of infuriating.

Perhaps Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, sums it up best. "I'm angry," Ogawa told me on Monday. "The world of investing isn't a charity."

Photo credit: REUTERS/Toru Hanai

Sierra Leone is holding an investment conference in London on Wednesday, showing even the world’s least developed countries can aspire to become emerging economies.

There are a few tentative signs of money going into the country, which was scarred by a 1991-2002 civil war.

CDC, the UK’s development finance arm, said last week it was investing $5 million in private equity in Sierra Leone, in small and medium-sized firms ranging from fishing to financial services.

Billionaire investor George Soros also said his economic development fund was making “significant commitments” to Sierra Leone.

Soros, Sierra Leone president Ernest Bai Koroma and former UK prime minister Tony Blair all feature at Wednesday’s conference.

Koroma has been in power for the last two years and investors see some stability, which is good for investment.

The government fired two senior ministers earlier this month in an attempt to improve its record on fighting corruption.

A consortium led by Anadarko Petroleum made an oil find off the Sierra Leone coast earlier this year, and the country has diamonds and gold, but analysts say there is little scope for investment outside the mining sector.

The country lacks the financial markets needed to attract investment flows, analysts say.

 ”It’s probably pre-pre-pre-emerging,” says one emerging market analyst.

But as investors start once more to chase higher returns around the world, could Sierra Leone yet become a “frontier” emerging market?

A lot of fuss is made about the dangers of speculators in commodity markets. But who is a speculator and who isn’t is based on a definition drawn up in the early part of the last century in the United States. The definition is no longer valid and anybody looking at those reports should be wary of drawing any firm conclusions.

For a start the word “speculator” with negative connotations is applied to pension funds, which invest over the long term to provide retirement income for many people around the world. Hedge funds are normally speculators but if they have hold the physical commodity then they can say they are commercial hedgers. Taking this theme a little further many natural resource companies run their Treasuries as profit making centres, which encourages them to trade the commodities they produce.

The London Metal Exchange has said it won’t go down the route the CFTC has and publish a weekly report detailing speculative long and short positions because there is no clear definition.

The CFTC bowing to popular pressure has continued to provide these weekly reports detailing long and short speculative positions, which ultimately could be misleading and make scapegoats of all investors whatever their ilk.

For better or worse, hedge fund returns have a tendency to follow markets, in part because most long-short funds are net long most of the time.

So after a huge rebound in the stockmarket this year, which has helped hedge funds make up some much-needed ground, October proved a difficult month when the market fell in the second half of the month.

After all 2009's growing optimism, investors were suddenly concerned that a withdrawal of government stimulus would harm an economic recovery in its early stages.

So, after a bumper 2008 and a miserable 2009 for short-sellers, it was they who leaped to the fore again in October - dedicated short bias returned 1.61 percent, while long-bias funds lost 0.38 percent and long-short funds were flat.

However, the long bet may not be over for hedge funds. John Paulson, the man who made billions betting on the subprime crisis and profited last year from shorting banks, is going long Cadbury.

With 2.54 percent of the chocolate maker, Paulson's move may show that, despite this year's huge rally, there may be more upside left in some stocks.

China’s dominant position in the arena of rare earth metals used in new technology such as batteries for hybrid cars and magnetic motors could be eroded by an Australian listed company – Greenland Mineral and Energy. The company is planning to list in London next year, pending the resolution of a couple of issues.

Greenland Minerals and Energy thinks it probably has access to the world’s largest depositis of rare earth metals and uranium — used to make nuclear energy.

Global consumption of rare earths last year is estimated at 135,000 tonnes or $1.5-$2.0 billion in 2008. Demand is forecast to grow by 65 percent by 2012 from 2008 levels.

 "Cocos" has become the user-friendly name for a new type of hybrid bond created to help UK bank Lloyds raise money from investors to break away from a government insurance scheme for bad loans.

This nickname seems to have caught on in financial circles as it is much snappier than the bonds' official title: Enhanced Capital Notes.

The name Cocos seems to have derived from "contingent convertible," which describes one characteristic of these bonds - they convert to equity in certain circumstances.

Coco was famously the first name of French fashion designer Chanel. She was not known for her understanding of the credit markets but she did know a thing or two about fashion and the value of tradition over new-fangledness.

One senior capital markets banker pointed out these comments she made:

"Innovation! One cannot be forever innovating. I want to create classics."

Some bankers hope Cocos can become credit market classics, but admit that the jury is still out.

Gordon Brown is truly having a rough time. Rebuffed by the United States, International Monetary Fund and others for floating the idea of a tax on financial transactions at this weekend's G20 meeting, he has now got short shrift from the Cayman Islands.

McKeeva Bush, the veteran Caymanian politican who is now premier of the British Overseas Territory, popped in to the Reuters London headquarters for a chat this week. His main concern was to explain plans for making the islands an easier place for financial services personnel to live in. He would like some of those 8,000 hedge nearly 10,000 funds that are registered there to be more than just brass plaques. But, when asked, he also had time to dismiss the idea of a transaction tax out of hand.

"That's an old hat. I have been hearing about it for 25 years. It's just not practicable. It will not work."

And just in case the point was missed:

"We have looked at it and we do not think this is something that would work."

Bush would not be drawn on the idea that a tax on transactions could, metaphorically speaking, sink his Caribbean island homeland under the waves. But Paul Byles, a government financial services consultant who accompanied the premier, did touch on the liquid nature of the issue:

"Tax flows, and they will move somewhere else."