African Thoughts: January 16, 2012

With two weeks of trading for 2012 under the belt African markets have been dull at best with market participants lacking any real conviction. There were some interesting developments on the continent last week. Below is a list of some of the best and worst performing bourses from the second trading week of 2012.

Egypt:

Egypt was the top performer on the continent last week with the EGX gaining 5.9%, albeit on rather thin volume. There was no real catalyst behind the gains except for international investors returning from the holiday season and looking for a few bargains in the market. Parliament is expected to convene next Monday and next week Wednesday the 25th marks the one year anniversary since the revolutionary movement began.

Kenya:

Kenya was the worst performing market on the continent with the NSE 20 Index falling 1.2%. Scangroup came under some pressure with speculation that employees have been behind the selling as a result of the recent release from ESOP. British American released a profit warning and KenGen had a negative article published in a monthly magazine that alleged corruption. On the economic front, the MPC held its monetary policy meeting last week and decided the keep rates on hold at 18%.

Mauritius:

The Mauritian market was rather quiet last week with value traded amounting to USD 3.1m for the entire week while the Semdex fell 1.1% to close at 1,873.14. The Banking Index was a negative drag on the market with MCB falling 0.6% and SBM falling 1.8%. The Rupee’s recent strength against the Euro is definitely having a negative impact on the market with the local currency trading at a 5-year low of 37.79 against the Euro (Europe is Mauritius’s major trading partner).

Nigeria:

Despite all the strikes last week, Nigeria managed to close in positive territory with the ASI gaining 0.6%. This should however be taken with a pinch of salt as volumes were dire at best. The economy ground to a near halt with tens of thousands of employees demonstrating against the government’s decision to scrap oil subsidies. There was hope of a possible resolution being reached over the weekend, but talks between the government and labour unions broke down with the government saying that they would cap gasoline prices at N97 per litre (labour unions are demanding that prices stay at N65 per litre). The situation seems to be relatively peaceful at the moment with most demonstrators staying at home.

Tanzania:

There has been quite a bit of interest in the Tanzanian Breweries IPO over the last few weeks, and with the allocations finally taking place foreigners looking to purchase further stock in the name would have to go through the following process:

After the IPO, the foreign ownership is now at about 65%, above the 60% foreign ownership limit. What this means is that any block for sale has to be offered to locals first. The way this is done is by showing the offer on a special board on the DSE called the AON (All-Or-Nothing) Board for 3 days. If the offer is still there, then the local broker has to write to the CMSA for special dispensation to allow the block to be sold to a foreigner. This takes 2-3 days. So if there is a block it will take 6/7 days to actually become available for sale to a foreigner. Although it sounds long-winded it is definitely possible.

Zambia:

The Zambian market ended the week rather flat with the LuSE gaining 0.1% to close at 3,954.32 when valued in local currency. However, thanks to the Kwacha’s 1.36% rally against the U.S Dollar the market rallied 1.5% when valued in U.S Dollar terms. FQM (+6.14%), Zambia Sugar (+3.7%) and CEC (+3.74%) were the major contributors towards the Index’s positive return for the week.

Zimbabwe:

For once both Zimbabwean Indices managed to close the week in positive territory with the Mining Index gaining 2.2% and the Industrial Index gaining 1.6%. The major movers for the week included Aico (+33.33%), Seed Co (+6.42%) and CBZ (+15.50%). In the Mining sector Bindura, Falgold and Rio gained 50%, 0.17% and 16.67% respectively. There was unfortunately no interesting news to report on the economic front.