By Andrew Cawthorne
NAIROBI, Dec 8 (Reuters) - Kenyan-born trader Aly Khan Satchu had a long and successful career in the City of London, but succumbed to the lure of Africa a few years back.
"I knew there were out-sized gains to be made here. I wasn't wrong," said the 43-year-old father-of-three, who returned in 2005 with his family to trade oil and African bourses.
But with the world entering recession, and many forced to cut back on just the sort of far-flung investment Africa was thriving on, did Satchu and other Africa bulls get it wrong?
The global credit crisis, hard on the heels of food and fuel price shocks in first half 2008, has weakened currencies, sent shares plummeting and forced GDP forecasts down around Africa.
"This is a temporary blip," said Satchu who writes a lively stocks column for a local paper and has penned a popular book "Anyone Can Be Rich". "I remain supremely optimistic still. You are going to get these periods of stress and strain -- but there is a new world coming in Africa."
Until recently, few would have dissented from such optimism.
Africa was viewed as the last, most exciting frontier market, with a huge potential for growth just starting to be seriously tapped. Foreign investment doubled to $315 billion between 2000 and 2006, according to Bank of America.
New players like China and India were pouring money in, from roads to oil exploration. The middle class was burgeoning. And growth levels had been on a steady path since the mid-1990s.
Then along came the credit crisis, and the mood changed.
At first, African policy-makers were upbeat, pointing out their banking systems were relatively unexposed and their economic fundamentals rooted on internal growth and demand factors that appeared unlikely to change.
But as the depth of the global crisis has become apparent, so too has the real impact for Africa. "Hot", hedge-fund money has, in some places, disappeared as fast as it came -- witness Kenya's hottest stock, mobile phone firm Safaricom where foreign investors bought in big only to bail out quick.
The stock shot from 5 shillings to nearly 9 after its IPO, but has fallen back since to around 3.5.
"NO REASON FOR PANIC"
Remittances from Africans abroad, a huge but often under-the-table factor behind growth at home, are slowing.
Funds are under pressure to trim their exposure to risky assets, though relatively low levels of involvement in Africa compared to other emerging markets limited falls, analysts say.
Illustrative of the new climate, Ghana's Ecobank had a slow take-up on foreign subscriptions for a $2.5 billion cross-border share offer, while Kenya, Tanzania and Zambia are waiting for better conditions to launch international bonds.
Foreign aid may suffer too. And slower growth in China and other Asian economies is bound to impact investment in Africa.
"I'm quite bearish on African frontier markets. There's been a lot of money allocated and I think a lot will be unwound," said Michael Cirami, portfolio manager at Eaton Vance.
Cirami, whose fund has reduced its exposure to Africa in the short-term, said there was some complacency on the continent - "similar to the way that eastern Europeans were last year".
Debt write-offs were a one-off boost, and the commodities boom had come off, he noted. "And we are seeing some worrying violence. Kenya was the wake-up call and DRC is a huge issue.
Post-election violence exacerbated a tough year for Kenya, while violence in mineral-rich east Congo has reminded investors of the serious political risk in many parts of Africa.
Long-term though, the prospects remain good, analysts say, even though some of the shine may have come off Africa.
Fundamentals remain strong in sub-Saharan Africa's so-called "Alpha" nations like South Africa, Nigeria, Ghana and Kenya.
The IMF predicts a slight dip in growth for sub-Saharan Africa, but still at about 6 percent this year and next.
So the corporate world has not lost all its enthusiasm.
Eyeing huge untapped demand in Africa, Britain's Vodafone is snapping up an extra stake in South Africa's Vodacom, giving it access to five new mobile markets on the continent.
South African firms are not letting up either on their push north as they seek to offset slower domestic growth.
Telkom, for example, plans to use cash from selling its stake in Vodacom to expand in Africa. And insurer Liberty earmarked 700 million rand ($70 million) for the same.
"Despite the severe pessimism about the global economy following the extraordinary meltdown of the Western financial system, the outlook for Africa remains very bright," said African Business editor Anver Versi.
He cited Africa's banking expansion, more inter-African trade and growth of mobile phone use as positive factors.
But some once-favoured economies are already feeling the pinch. Nigeria's naira currency has fallen 10 percent in a week and a half, following sharp falls in the stock market as investors digest the collapse of oil prices from almost $150 a barrel in July to less than a third of that now.
With liquidity drying up, Nigeria spent $900 million just on Friday to restart the interbank forex market but banks are reluctant to trade at current rates, fearing further falls.
As commodities besides oil also fall, some new mining projects are being mothballed and growth forecasts cut.
"Africa -- outside South Africa -- has the advantage that it is less developed and so less exposed to global markets," said Claire Dissaux, global strategist at fund manager Millennium Global. "But at the same time, it is very exposed to commodity prices and that is much more of a problem."
However, an analysis by Nigerian bank UBA Capital forecast Africa's exports would decline only modestly while banks were helped by capital controls. "While there is no room for complacency about growth prospects, there is still no reason to panic," wrote UBA researcher Richard Segal. (Additional reporting by Rebecca Harrison in Johannesburg and Peter Apps in London; editing by Stephen Nisbet)