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The FTSE 100 noticed a document closing excessive on Thursday (6 February). This was regardless of the Financial institution of England dramatically reducing its 2025 UK financial development forecast from 1.5% to 0.75%.
A few of this optimism might be defined by the choice earlier within the day to cut back the bottom charge by 0.25%. This implies it’s cheaper for firms to borrow.
Nevertheless, at first sight, it appears odd that traders reacted so positively to the forecast downgrade.
However in line with Goldman Sachs, 78% of the revenues of the FTSE 100’s members had been earned abroad. Issues with the home economic system are, due to this fact, prone to have much less influence.
And falling rates of interest will in all probability result in a weaker pound. This implies abroad earnings can be value extra when transformed again into sterling.
These elements might clarify why the outward-looking FTSE 100 has by no means been greater.
Nevertheless, this world attain may very well be a double-edged sword. If President Trump carries via on his election pledge to impose tariffs on most imports into the US, the costs of these items will rise. The gross sales and earnings of the UK’s largest exporters might then fall.
For now a minimum of, it appears to be like as if Footsie traders have put these ideas to the again of their minds.
A attainable choice
However in these unsure occasions, I feel there’s one FTSE 100 inventory that traders might contemplate including to their portfolios — Airtel Africa (LSE:AAF).
As its identify recommend, its solely publicity is to Africa, which implies it’ll fall exterior the scope of any Trump tariffs. And the telecoms and cell cash supplier isn’t reliant on the delicate UK economic system.
Based on the United Nations, the inhabitants of Africa will almost double by 2050, to 2.5bn. By then, it’s estimated that roughly 25% of the world’s inhabitants can be dwelling on the continent.
Over the approaching many years, Africa’s additionally prone to see among the fastest-growing economies on this planet. And as disposable incomes rise, the demand for cell phones is prone to improve.
The corporate not too long ago reported its outcomes for the 9 months ended 31 December 2024. These revealed a 7.9% improve in its buyer base — to 163.1m — throughout the interval. Importantly, knowledge utilization per individual elevated by 32.3%.
Buyers had been impressed. On the day, the inventory closed 9% greater, at 145p.
Barclays has set a value goal of 175p on the inventory. After all, this is only one opinion however it does present that the corporate has some influential supporters.
Potential points
Nevertheless, as with every funding, there are potential dangers.
Prospects pay of their native currencies, which might be unstable. For instance, Nigeria’s naira has devalued by greater than 40% over the previous 12 months. Primarily based on buyer numbers, the nation is Airtel Africa’s most essential.
Additionally, telecoms infrastructure doesn’t come low-cost. To assist its development plans it’s needed to borrow. At 31 December 2024, internet debt was $5.27bn, a rise of $1.99bn (60%) on a yr earlier.
And doing enterprise on the continent might be troublesome attributable to political uncertainty.
Nevertheless, with its sturdy development potential, lack of publicity to the UK — and since it’s prone to keep away from any Trump tariffs — I feel Airtel Africa’s a inventory that traders might contemplate shopping for.
