African Thoughts: August 06, 2012

Risk appetite continued as the Dow rose for the 4th consecutive week, the longest rally since October. Despite a tough start to the week as first ECB President Mario Draghi and then Fed Chairman Bernanke failed to reassure investors on immediate efforts to bolster the economy, the global week closed very strongly after NFP came out much stronger than expected. Almost all global indices closed the week in the black, and African markets mostly followed suit.

Some of the exceptions to the weekly strength were:

Zimbabwe Mining:

Zimbabwe mining (-5.37%): This was mostly due to a technical issue on Falgold. Although the name didn’t actually trade on the week, it had previously traded at 35c but was offered lower at 30c during the week. The closing price was thus down at 30c, dragging the mining index down. Falgold is currently trading under cautionary after the directors issued a statement that they are involved in discussions that may have a material impact on the company. Bindura closed down 3.23% at 3c after announcing the extension of the group’s $21mill rights issue as well as media reports that the group had suspended salary payments to staff. The rest of the stocks closed unchanged for the week.

Kenya:

Kenya (NSE20 -70bps): A quiet week in Nairobi in terms of volumes while the NSE20 also showed softness despite some strength into Friday’s close. Banks (-2.0%) dragged the index down as well as being the most active sector accounting for 32% of the weekly turnover. Equity Bank closed down 5.6% at KES21.25 as some foreign selling came in the name. KNCB closed unchanged at KES24.25 backed by their recent good H1 results. NICB (-9.1%) was weak after it showed poor support for its 1:4 rights issues which closed on 30 July while BBK closed down 2.4% after some profit taking. Once again, EABL was an active trader with foreign participants heavily involved in the crosses in the name. The name closed down 2.6% at KES220 and this was mostly due to profit taking. EABL results are expected to release the FY results soon.

Botswana:

Botswana (DCI -19bps): Nothing much of note to report in Gaborone. Despite the market closing down marginally, the biggest outperformer was Stanchart which closed +5.03% as demand for the name continues. Letshego closed unchanged at 140t while Sefalana posted good results for the year ended 31 April 2012, showing revenues up by 10.6% and profit for the year up 75.8% at P86.9mill.

Some the outperformers for the week:

BRVM:

BRVM (Comp +3.47%): The BRVM Comp rose by 3.47% mostly on the back of gains in the Agro-Processing sector (+14.01%). SOGB (+38.14%) and SAPH (+20.00%) were the drivers of this subsector. The telecoms sector also rose by 5.91% with Onatel +11.67% after the H1 results were released. The Petroleum sector also increased by 4.58% driven north by Total CI (+8.64%) and Vivo Energy CI (+5.29%).

Nigeria:

Nigeria (ASI +99bps): A solid week in Lagos despite the technical issues on Thursday which meant that most trades could not be confirmed until Friday morning. As usual, banking drives the volumes particularly after most names have released their H1 numbers with the sector closing up 1.68% for the week. The only top tier banks yet to report are GTB and Access – we anticipate these will come out in mid-August as these banks typically only post the audited results and not the unaudited results like other banks. Tier 1 banks are seeing a lot of activity and we anticipate this to continue this week as investors look to take positions given the overall good results. In other sectors, Wapco delivered some good results last week which created demand for the counter and thus closed up 2.8% while the consumer goods sector closed up 2.65% for the week. Nigerian Breweries was one of the largest gainers across all sectors with the name closing up 4.53% at N122.30 while Glaxo Smithkline gained 11.76% to close at N3.00. Tomorrow (Tuesday) we have the Dangote Cement management conference call on their H1 numbers. Other results which came out last week included PZ Cussons, Dangote Sugar, Glaxo Smithkline, UACN, ETI, Cadbury and FCMB. Other news about Dangote Cement is that the company plans to start production in South Africa from 2013 via its SA subsidiary Sephaku Cement. DangCem owns 64% of Sephaku and plans to become the first new SA cement participant to open its own new plant since 1934 and will be looking to challenge some of the larger SA producers like Lafarge, PPC and Afrisam.

Egypt:

Egypt (+2.6%): The market lost its bearish trend of recent weeks after the announcement of the new government and the news that the new ministers will swear the oath by this Thursday which shed much of the uncertainty that had been clouding the market. Optimism from both international as well as local institutions was evident particularly in the blue chips.

South Africa:

South Africa (+2.4% in USD), Namibia (+2.4%): As usual, these indices typically track each other as well as global markets. As per earlier, almost all global markets closed in the black and the JSE was no exception.

Mauritius:

Mauritius (Sem-7 +40bps): A small gain for the Sem-7 mostly due to outperformance on SBM, Rogers and NMH. Activity was mostly focused on NMH and MCB. The banking sector was mixed, with MCB closing unchanged at Rs167 while SBM ticket up slightly to close at Rs82.50. In the conglomerate sector, Rogers saw some crossing action on Wednesday and closed up 1.6% at Rs310. The hotel sector is always popular in Mauritius. Last week saw NMH incredibly active with a large cross taking place at the beginning of the week. The name closed up 1.5% at Rs68 for the week while Sun closed up 30bps for the week while Lux Island closed down 2.1% for the week. In other sectors, Omnicane closed the week down 4% at Rs72.50.

Have a great week