African markets rebound on inflows of foreign capital
A Nairobi Securities Exchange worker on the trading floor. The NSE All-Share Index has gained 10 per cent since the beginning of the year, behind Egypt’s EGX100 — which is up 12.8 per cent — and ahead of other second tier peer bourses. Photo/Salaton Njau
What you need to know:
African markets were among the worst hit by the easing of the US Federal Reserve’s stimulus programme but the capital outflows are reversing after the European Union instituted measures of its own to stimulate growth.
Latest data from Africa Alliance shows that out of the top 18 African stocks markets, 15 have recorded positive index movement since the turn of the year.
African currencies, however, remain under pressure, recording depreciation against the US dollar across the board over the past six months.
African stock markets have been on a rebound over the past two months boosted by a return of foreign capital inflows especially from Europe.
The African markets were among the worst hit by the easing of the US Federal Reserve’s stimulus programme but the capital outflows are reversing after the European Union instituted measures of its own to stimulate growth.
“Historically, monetary easing measures have seen investors repatriate their investments into emerging and frontiers markets. We expect this to be the case as the Eurozone rolls out its easing policy,” said Genghis Capital in their May macroeconomic update.
However, there are still long term risks as the US bond buying cut-back is likely to improve interest rates.
Latest data from Africa Alliance shows that out of the top 18 African stocks markets, 15 have recorded positive index movement since the turn of the year.
The Nigeria All Share Index (down 0.2 per cent), Mauritius Semdex Index (down 0.7 per cent) and Zimbabwe’s Industrial Index (down 10 per cent) are the only ones to record declines in the six months to June.
Kenya’s NSE All-Share Index has gained 10 per cent since the beginning of the year holding onto the second spot behind Egypt’s EGX100 — which is up 12.8 per cent — and ahead of other second tier peer bourses of Nigeria, Morocco, Tunisia and Zimbabwe.
“There has been a good rebound and this speaks to outstanding demand for blue chip sub-Sahara African equities and bonds, and this was evidenced in the four times oversubscription of our Eurobond,” said Rich Management CEO Aly- Khan Satchu.
South Africa’s Johannesburg Stock Exchange, the only first tier market on the continent, has a year to date gain of 9.4 per cent, accelerating from the end of the first quarter when its gain stood at 2.4 per cent.
Smaller third tier markets have also seen their index gains accelerate in the second quarter of the year, led by the Zambia Lusaka All Share Index, which is up 13.8 per cent this year.
Other gainers include the Rwanda RSE Index that is up 13.2 per cent, the Tanzanian Dar All Share Index up 12.7 per cent and the Ghana All Share Index, which has gained 10 per cent.
In the Kenyan market, improved earnings by listed companies have also sustained demand for securities, especially on the small and medium size counters.
Foreign participation as a percentage of total equity turnover month on month jumped to 57 per cent from 52 per cent between March and April this year, with April’s total turnover of Sh15.8 billion comprising of Sh9.7 billion in foreign purchases.
African currencies, however, remain under pressure, recording depreciation against the US dollar across the board over the past six months.
Currencies of economies that depend on commodities continue to react to a slowdown in the Chinese economy, which has reduced demand for commodities.
The Malawi Kwacha is up 8.6 per cent against the dollar this year, in contrast to all the other 18 currencies on the Africa Alliance report.
The biggest declines are seen on the Ghana Cedi, which is down 23.7 per cent to the dollar this year, and the Zambia Kwacha that is down 13.5 per cent.
The Kenya shilling is down 1.76 per cent to the dollar so far this year, with an outlook note from Standard Chartered Plc saying there remains a possibility for further weakening due to lower export inflows and rising international oil process.
