Relative price indicators
The two years between 2013 and 2014 saw a major increase in the price-to-earnings ratio of the MSCI Emerging Frontier Markets Africa Ex South Africa Index, from 13.29 in the first quarter, to 30 at the end of 2014. Investor confidence within Africa was high relative to MSCI Emerging Markets Index, which had a price-to-earnings ratio of about 13 at the time. The subsequent years saw a drastic reversion in the price-to-earnings ratio back in line with emerging markets.
Dividend yields for MSCI Emerging Markets indices have remained constant between 2.5% and 3.5% in 2013. Between the end of 2013 to the first quarter of 2016, Emerging markets achieved a higher dividend yield relative to MSCI Emerging Frontier Market Ex South Africa.
In the second quarter of 2016 MSCI Emerging Frontier Market Ex South Africa surpassed the Emerging markets by 86 basis points and has remained the highest thus far. The dividend yield graph of the MSCI Emerging Frontier Market Ex South Africa highlights the close relationship that most African economies have to the commodity cycle. From the graph it is clear that dividend payout ratio decreased in line with commodity prices and that the subsequent recovery tracked the commodity price recovery.