African Thoughts: March 19, 2012

With developed markets putting in a good performance last week it was bit unfortunate to see some of the bigger African markets come under some pressure. However, in saying that the likes of Egypt have really had an exceptional run this year so far and it is not too surprising that we saw some profit taking last week. On the positive side there has definitely been a noticeable increase in volumes which could be attributed to the recent increase in risk appetite across the globe.

Malawi was one of the strongest performers on the continent last week with the market rallying 0.7%. Standard Bank recently reported results with profit after tax coming in at MwK 3.5bn and was the main catalyst behind the move higher, as investors and speculators position themselves ahead of further results announcements. Word on the street is that there has been one large buyer in the market recently making significant purchases including 5 million NBM.

The Botswana market closed the week slightly higher, gaining 0.3%. BIHL reported full year 2011 results which saw profit after tax increase 42%; the counter rallied 4.35% on the back of these numbers. Stanchart and Sechaba also put in a relatively good performance for the week, closing in positive territory, however as is always the case in Botswana, liquidity continued to be a major concern.

Things were not pretty in Zimbabwe last week with the mining index falling a whopping 7.5% while the industrial index fell 2.4%. The negative sentiment was as a result of Zimplats (majority owned by South Africa’s Implats) succumbing to government pressure to cede 51% shareholding to indigenous investors (10% to community share trust, 10% to employee share trust and 31% to the sovereign wealth fund). This decision spooked investors as there is a serious worry about the government’s capacity to pay for the shares.

Egypt was another one of the poor performers with the EGX 30 falling 4.4%. As mentioned above it’s not surprising to see some form of profit taking (the majority of which was done by local investors last week) after the great run with the Index still up 27% YTD. Adding to the move lower was talks that parliament was going to withdraw confidence from the current government (this has however subsequently been resolved).

After a great run in Kenya the market posted its first weekly loss in 4 weeks with the NSE 20 Index falling 2.4%. Equity Bank fell 2.6% as Friday was the last day that the name traded cum-div. KNAL continued to come under pressure ahead of the company’s rights issue, with the name falling 18.5% last week alone. All eyes will be on EABL, Barlcays, Bamburi and BAT as the names will all go ex-div later this week. The IMF said that they are happy with the monetary policy developments and will pledge a further $110m.

Nigeria ended the week slightly lower with the ASI falling 0.60%. FCMB put out a profit warning last week announcing that PAT is expected to come in at - N9bn compared with previous guidance of N10bn, as a result of making further provisions and write-offs. On the positive side both Access Bank and Guaranty Trust Bank released rather impressive full year 2011 results on Friday with PAT showing an increase of 50.96% and 37.31% respectively. The monetary policy committee opened its latest meeting today, with the consensus view calling for rates to be unchanged at 12.00%. Inflation numbers for February released earlier this morning showed a decrease to 11.9%, which should support the consensus view to keep rates on hold.