Due to the ongoing challenges in frontier and emerging markets, global asset manager, BlackRock, is shutting its iShares ETF, valued at $400 million.
iShares ETF, which included investments in countries such as Nigeria and Kenya, is being liquidated owing to rough economic times and currency issues.
Approved by the iShares Board of Directors, the closure comes as these markets struggle with liquidity problems and restrictions on currency repatriation.
These difficulties have been compounded by the weakening of local currencies like the Nigerian naira, making it increasingly difficult for investors to manage their assets effectively.
In a statement, iShares outlined that the fund will enter an extended liquidation period, with the final day of trading anticipated to be March 31, 2025. During this period, the fund will divest its holdings across various markets and hold the proceeds in cash and cash equivalents. The process of converting local currencies, particularly the naira, will influence the timing of this liquidation.
“Currency conversions, including the conversion of Nigeria’s naira, will impact the timing of the fund’s liquidation,” iShares stated. The fund will cease trading and the creation and redemption of creation units will halt no earlier than August 12, 2024, but as soon as practicable thereafter.
African equities have lost their appeal to foreign investors due to low returns compared to other asset classes and currency scarcity in markets like Egypt, Nigeria, and Kenya.
The iShares ETF had previously held huge investments in Kenyan companies, such as Safaricom, Equity Group, and KCB Group, with a $5.2 million investment in Kenya alone.
Despite actions to promote fair and transparent investment opportunities in these regions, the challenging economic environment has led many foreign investors to reconsider their positions. The fund also had exposure to other markets including Egypt, Morocco, Bahrain, Bangladesh, Colombia, and Vietnam, among others.
International investors are pulling out of local bourses due to the tough economic climate, company downsizing, and currency devaluation. This period speaks volume of the need for better liquidity management and economic stability to attract and retain foreign investments.
The closure of the iShares ETF also reiterates the implications for local economies that rely heavily on foreign investment. Moving forward, these markets will need to address these underlying issues to regain investor confidence and stabilize their financial sector.
