African Thoughts: February 27, 2012

Globally, we saw some somewhat mixed sentiment from global investors. Global stock markets ended the week little changed. Its been a strong year to date for most global indices so last week it felt as if markets were collectively holding their breath as they await to see what ramifications will come out of the Greek bailout. As has been the case over the past couple of years, the Euro debt crisis continues to rumble along.

In terms of Africa and African trading, we have noticed a distinct increase in clients who are willing to work orders again. For most of 2011 participants were sitting on their hands but it definitely feels that the investors are back. We are in the midst of reporting season in Kenya and Nigeria. This could also be a reason why investors are more active as they position portfolios ahead of and post earnings.

In terms of some of the top performers:

Egypt (+3% in USD terms):

The EGX continues to climb with the EGX30 up a whopping 42.24% year to date. The optimism surrounding the political road ahead for the North African country continues to be strong hence the solid performance again last week. We cannot attribute the rally to any other specific factor but some good retail buying was evident. Telecoms saw some mixed views around the EMOB/FT deal while the real estate sector was a focus for investors as M&A rumours in the sector continue. COMI rallied after results came out better than expected.

South Africa/Namibia (+50bps in local terms. +2.6% and +2.5% respectively in USD terms):

As usual, SA and Namibia track each other as well as global markets and were thus slightly positive for the week in local terms. The main reason for their outperformance was the ZAR strength which is now trading around the 7.60 level.

Tunisia (+2.4% in USD):

Demand for stocks was mainly driven by the successful IPO of Internet Service Provider Hexabyte. The company has seen its share price almost double in its first full week of listing. Hexabyte announced it will do an additional floatation of 5% of the company which increased investors’ interest in the market. Apart from Hexabyte, the 0.98% rise in the index is driven by heavy trading on banks (Amen Bank, Banque de Tunisie in the forefront) as investors anticipate better than expected numbers for the full year 2011 (audited figures will be out in April).

Kenya (+2.2% in USD):

Nairobi was pushed higher by increased speculation as we are in the middle of reporting season. Sentiment was most certainly helped by the positive results released by a number of companies. It must be noted though that foreign activity was once again relatively light and overall volumes were also lower than normal as weekly turnover declined to $8.76mill. The top 3 performers for the week all released FY11 results during the week. The top performers were Pan Africa (+20.5%), BATK (+15.4%), NICB (+10%), Kenya Power (+7.9%) and Sasini (+7.5%). KNCB also saw some renewed buying interest while EqBnk ended the week unch at KES19.05 and Safcom closed the week down at KES3.10. Money markets are still flavor of the month with issues in this asset class massively oversubscribed.

Nigeria: (+0.4%):

The NSE was up 40bps. The Banking sector saw the most action with investors clearly positioning themselves ahead of the results with this sub-sector up 6.9% for the week. Large volumes went through in UBA, Zenith, Firstbank and Access. Incredibly, UBA could not find buyers for love nor money about 2 weeks ago but has now rallied the maximum each day for 8 consecutive days. We expect this week to continue in much the same vein and we also expect results to start coming out this week. Another possible and less notable reason for the increase in activity on the NSE was the decline in the short term interest rate caused by the disbursement of the monthly Federal Allocation which is expected to enhance domestic participation.

Some of the bottom performers:

Zim Mining (-5.5%):

The Mining index was down 5.5% while the Industrial index was only marginally soft by 22bps. The market was relatively quiet during the week with no major action taking place. Reporting season begins this week which should see an uptick in activity.
There was some talk of delisting stocks with a market cap of less than $1mill which saw increased activity on some of the micro-caps. The top performers were Zeco (+900%!!), Astra (+80.5%) and Interfresh (+42.86%). In terms of the bigger names, Innscor was down 6.25% to 60c while the main cause of the drop in the Mining Index was Hwange (-14.29%) which closed at 30c. Hwange is 68% of the index.
Interestingly, the Zimbabwe Securities Commission plans to investigate irregular price movements on the ZSE. Over the past couple of years there are trends whereby at quarter and year ends it is distinctly noticeable that some stocks have wild price swings, in some cases more than 40% movements in 1 day! These price changes are not supported by any fundamental reasons. We eagerly await the results of this.

Zambia (+90bps but -20bps in USD):

The LuSE increased by 90bps mainly due to Stanchart which was up 5.9% and Puma which was up 5.3% for the week. Investrust was the biggest loser down 5.9% and FQM which was down 4.5%. The kwacha depreciated against all major currencies.

Mauritius (Sem7 -1.3%, Semdex -1.2%):

Much of the down movement can be attributed to the EU Commission releasing a report that they expect Euro area growth to contract by a further 0.3%. As we know, Maur has close ties with Europe. The banking sector was down -1.2% dragged down by MCB (-1.8%) while SBM was unch. Hotels were down -2.7% with NMH -4% the biggest laggard while Lux Island Resorts was down -90bps and Sun down -50bps. On the positive side, tourist receipts were up 10% for 2011.