London fund’s Africa equity returns hurt by NSE decline
CFC Stanbic offices in Nairobi. Allan Grey has invested in the bank whose shares have had a poor run at the Nairobi bourse recently. PHOTO | FILE
What you need to know:
Allan Grey (AG) Africa Equity Fund has invested 6.4 per cent of its $247 million (Sh25 billion) fund in Kenyan equities— equivalent to about Sh1.6 billion— mainly in the CfC Stanbic stock.
Pan African investment firm Allan Grey (AG) Africa Equity Fund has reported a 10 per cent fall in returns from African equities, partly attributing this to its investment in the Nairobi Securities Exchange currently in the largest decline in valuation since 2011.
AG which has holdings in 43 companies across the continent has invested 6.4 per cent of its $247 million (Sh25 billion) fund in Kenyan equities— equivalent to about Sh1.6 billion— mainly in the CfC Stanbic stock.
The decline in returns is indicative of the hit pension funds, unit fund managers and institutional investors are bracing to book across the Kenyan and other African stock markets.
“The Fund generated negative returns for the quarter mainly because of negative returns from one of our largest holdings, Zimbabwe’s dominant mobile operator Econet Wireless, as well as two smaller positions, Kenyan bank CFC Stanbic and Zimbabwean platinum miner Zimplats,” said Allan Grey in a performance update.
“CFC Stanbic has a sizeable business in South Sudan, which has been basically shut down by the escalating violence in the county.” CfC Stanbic’s share is among the hardest hit by the negative run among bank stocks, and is currently 20 per cent down in the year at Sh100.
The Allan Grey’s performance is benchmarked against the MSCI Emerging and Frontier Markets (EFM) Africa Index, which includes in its constituent stocks the top Nairobi Securities Exchange (NSE ) counters of Safaricom, East Africa Breweries (EABL) and Kenya Commercial Bank (KCB).
Local and foreign institutional investors including pension funds, insurance companies and private equity firms enjoyed rising returns from equities in Kenya between 2012 and 2014, where the stock market was on a sustained bull run.
This year the market has seen a reversal of fortunes, with the main NSE 20 share index now 10 per cent down since January at 4607 points.
Data from the Insurance Regulatory Authority (IRA) for up to March shows the insurance industry’s investments in equities stood at Sh63.88 billion, representing 14.1 per cent of the total Sh452.84 billion assets.
The Retirement Benefits Authority’s (RBA) latest data on industry assets (as at June 2014) indicated that pension fund holdings in equities stood at Sh198.7 billion, representing 26 per cent of overall assets of Sh750 billion. These holdings are mainly in the blue chip stocks of Safaricom, EABL and KCB.
Alan Grey however sees opportunity for further investment in the falling stocks, singularly noting the fundamentals of CfC Stanbic remain solid.
“We believe these companies are excellent businesses and the lower share prices present attractive buying opportunities. The long-term fundamentals of the Kenyan operations are sound and a peaceful South Sudan will provide upside,” said the firm.
Local stockbrokers however see the market remaining under pressure due to the weakening shilling, which cuts the dollar returns for foreign investors, reducing their willingness to invest leading to exits as they look to protect gains made since 2012.
“Investors have continued cashing in any gains harnessed from the equities market as others continue averaging down their losses in a bid to cut on any further losses,” said Genghis Capital in a stock market report.
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Note: The results are not exact but very close to the actual.
