* Frontiers fund Insparo favours Nigerian bank Eurobonds
* Sees growth in telecoms stock Sonatel
* Research head says Botswana, Nigeria could issue Eurobonds
(Repeats to additional clients with no changes to text)
By Carolyn Cohn
LONDON, Aug 21 (Reuters) - Nigerian bank debt and telecoms
stock Sonatel
The fund started last year with $125 million and now invests $140 million in the region. It invests in both equities and in local and hard currency debt.
"The growth story in Africa is underestimated and misunderstood," Francis Beddington, head of research for Insparo, told Reuters in an interview.
"Areas of growth include banking, consumers, housing, energy and infrastructure."
Insparo invests in the Eurobonds of two Nigerian banks which
recently passed their audits -- Guaranty Trust Bank
The Nigerian central bank injected $2.6 billion into five Nigerian banks which failed their audits last week and removed their senior management, a move which most analysts said would attract investors encouraged by the banking clean-up.
Government debt provided opportunities in several African countries, Beddington said.
"There has been a growth in fixed income markets across the curve. In Nigeria, yield curves have stretched out to decent lengths, where four years ago they were only offering 91-day bills."Nigeria introduced a 20-year domestic bond last year.
Euro-denominated deals issued by Angola in the syndicated loan market were also attractive.
Sub-Saharan African countries have put Eurobond issuance plans on ice during the global financial crisis, following the launch in 2007 of deals from Ghana and Gabon, but Beddington said this could change.
"There is strong demand for sovereign credit."
He said Botswana, which is rated at A by Standard & Poor's and A2 by Moody's, and borrowed $1.5 billion this year from the African Development Bank, might launch a Eurobond, and Nigeria also could.
EQUITY PICKS
Among equities, Insparo favours Senegal's state telecoms
company Sonatel
"It has a low premium and massive growth potential," said Mohammed Hanif, chief investment officer at Insparo.
"There is organic growth as people get connected with the telephone."
Mobile phone penetration is currently seen at less than 45 percent in Africa.
In Gulf markets, Insparo managers said they favoured assets outside the oil industry.
Beddington said Insparo looked at assets regardless of country but that the Ivory Coast was particularly attractive as an economy, with growth of 3-3.5 percent.
Zimbabwe was also improving under the new unity government.
"We have exposure in Zimbabwe via the equity market," he said.
"Zimbabwe had reached a situation where the country could hardly get any worse. Surprisingly, hyperinflation is quite easy to break and with that comes an aggressive rebound in economic activity." (Editing by Jon Boyle)