African Thoughts: October 15, 2012

Zimbabwe:

During the week under review, the industrial index added 1.89% to close at 154.62 points. This was on the back of increases in the prices of CBZ (+6.1%) to 10.61 cents; Delta (+4.79%) to 87.5 cents; Seedco (+3.8%) to 95c; Innscor (+2.86%) to 76 cents; OK Zim (+2.76%) to 14.5 cents and Econet (+1.05%) to 480.1 cents. These counters collectively constitute about 60% of the index. The counters have had significant foreign interest over the past weeks. The mining index added 0.21% as a result of gains in Rio (+8.2%) to 66 cents. Losses were recorded in Bindura down 6.7% to 2.8c. The activity in the mining industry remains subdued with an average turnover of US$31,000 in the past week. Mirroring the gains in the indices, the total (all-share) market capitalization rose by 1.81% in the week. The total market turnover for the week was up 92% from US$3.8 million last week to US$7.4 million during the week under review. This was mainly as a result of a special bargain in CBZ worth US$2.1 million which was executed in the week. Foreigners were net sellers in the week; they purchased shares worth US$3.3 million and sold shares worth US$3.4 million in the same period. We anticipate the market to be bullish into the coming week on the back of strong foreign demand in blue chip counters such as Delta, Econet and Innscor.

Nigeria:

The NSE ASI appreciated by 3.20% to 27,287.85 points last week, which indicates a 31.64% YTD improvement. In our view, the banking sector was the key market driver for last week, appreciating by 7.7%. Solid 9M interim numbers by Diamond Bank sparked interest in the banking sector, especially for other tier 2 banks, as activity levels improved. Skye Bank, FCMB, Fidelity Bank, and Sterling Bank were particular beneficiaries. Correspondingly, prices for these stocks appreciated by 33.06% (Diamond), 24.63% (Skye), 14.92% (FCMB), 25.13% (Fidelity) and 25.79% (Sterling) respectively. Also we note that the impact the inclusion of these stocks in the market making basket has: 1) widened the price movement band, 2) improved liquidity as it guarantees a trustworthy counterparty to investors’ transactions.

General market sentiment was mostly positive last week. YTD the NSE Banking, Consumer Goods, LII and Insurance sectoral indices have appreciated by 61.91%, 38.43%, 22.02% and 6.76% respectively. However, the NSE Oil & Gas index has lost 26.02% due to continued investor pessimism. We are expecting the 9 month result season for banks to continue this week, so we think the market direction will be significantly influenced by earnings. Another important development from last week was the disagreement between the executive and legislative arms of the government on the oil benchmark for the 2013 budget. The Executive had set it at US$75 per barrel, however the National Assembly pegged it at US$80. The National Assembly are pushing for a reduction in the national budget deficit for 2013 in a bid to reduce domestic borrowing. However, the government is adamant that raising the benchmark could hurt the economy as crude oil prices remain volatile.

Ghana:

In spite of a sharp decline in stock market activities last Thursday, bulls emerged dominant at the close of the week, as a decline in September inflation, fuelled speculations that interest rates on risk-free assets are likely to decline earlier than expected. The market index rose as a result of price increments in FML, GCB and SCB (after the announcement in Bonus issue). Inflation for the month of September came in at 9.4% and 10 basis points better than the previous month’s figure of 9.5%. Inflation which has rallied since March, recorded its first decline in seven consecutive months, signaling a possible halt in the current hawkish stance in monetary policy. The 0.15% rise in the broader market was also supported by the speculative actions of investors who took optimistic positions ahead of the release of third quarter results of listed companies. We maintain our previous week’s position, in which we stated among others that….’’We don’t project any significant changes on the level of activity on the market for the rest of the year. Volumes and Values are expected to remain low while the market indices will continue to fall at relatively lower rates’’ SCB’s announcement of its pending Bonus Issue of 5 new shares for every existing share is also expected to stimulate investor interest in the stock. We therefore anticipate a lot of activity in SCB which is expected to boost share price appreciations. Guinness Ghana Breweries is also expected to continue to gain.

Botswana:

The week under review saw the DCI gaining a further 0.37% to settle at 7443.39 points. The upward movement was mostly supported by gains recorded in Letshego which went up by 3.6% to settle at 145t, as investors take up positions ahead of the announcement of Letshego’s interim results, and also the disappearing of a share overhang that put a large cloud over the name. Going forward, we expect the market to continue to be driven by expectations of financial results for counters that are still to announce.

Kenya:

The NSE 20 touched a new year high during the week of 3,997 points 3 points shy of touching the 4000 points mark. The index however closed the week at 3995.03 points. Equity turnover fell 54% w/w to USD 16.48m due to a decline in foreign investor participation. Foreign investor inflows declined this week to USD 4.98m compared to USD 5.08m in the previous week. Foreign investors stayed away from the market for most of the week with participation dropping from 73% last week to 35% this week. Equity Bank recorded the highest foreign inflows (USD 1.3m), while Co-op Bank recorded the highest outflows (USD 104.4k). Equity bank was this week’s top mover buoyed by strong foreign investor demand. The counter however slipped 1.1% w/w to close at KES 23.25. Kenya Airways was also heavily traded this week with foreign investors selling off the stock. Investors expect weak performance figures for 1H13 owing to expected increase in operating costs. Top gainers this week were all on thin volumes except Uchumi which touched its highest level since listing of KES 19.85 during the week. Investors are anticipating strong FY12 financial performance with results expected to be released in coming weeks. KenolKobil witnessed selling pressure throughout the week after it emerged that the deal between the oil marketer and Puma energy could be delayed further following the courts declining to suspend an interim injunction obtained by a sacked worker stopping the firm’s takeover. CFC Stanbic rights trading closed this week with a total of 163.5m rights trading overall.

Mauritius:

Over the last three sessions the Semdex saw a downward trend with greater weaknesses experienced during Friday’s session driven mostly by the blue-chips. On a w-o-w basis, the all share index gave up 0.3% to reach 1,691.83 points, while the SEM-7 index lost 0.4% to 326.17 points. The main loser on the SEM-7 counter was Rogers which dropped by 5.8% to close at Rs290.00. The company has also been reclassified from the Commercial counter to the Investment counter. Total turnover on the market amounted to Rs325.5m and foreign investors were net sellers to Rs33.7m. Mixed feelings were felt on the hotel counter with significant volume traded over the week. NMH reached Rs57.00 during the week before easing off to close at Rs56.50 (+0.9%) on 119.9k shares exchanged. Lux Island Resorts fell by 3.1% to close at Rs15.50 on 110.3k shares while Sun Resorts dropped by 3.9% to Rs27.20 on 694.3k shares, out of which 641.7k shares were foreign sales. Hotel Ambre which is leased by Sun Resorts was opened on October after eight months of extensive renovation works.

Egypt:

The market ended the week down 2.71%, this was mainly attributed to President Morsi's recent speech during celebrations of the 6th of October, he indirectly mentioned transactions and activities of OCI and TMG. Even though he did not mention the companies by name, it was clear to everyone that he was talking about the two mentioned. Mursi hinted that OCI indirectly owed EGP36 billion in capital gains taxes to the government on account of the sale of the group's cement business to Lafarge in 2007. The President noted that OCI merged and listed the cement segment of its business as part of the construction arm with the objective of avoiding capital gains taxes. HRHO managed to gain investor appetite last week, this was mainly driven by the news out on HRHO where the company stated that they are expecting the EFSA's approval for the Qinvest deal by next week (it was approved today), it’s worth mentioning that the main buyers last week were GCC (Gulf) investors. Egypt's EFG Hermes announced earlier this year in March that they are in talks to create a region-wide investment bank with Qatar's Qinvest. Qinvest will control 60 percent of the new bank, which will be called EFG Hermes Qatar, and provide $250 million to increase its capital. EFG-Hermes will control the remaining 40 percent and have the right to sell its shareholding to QInvest at any time after 12 months but before 36 months from the signing for 1 billion Egyptian pounds ($165.4 million). The alliance has "the aim of creating a leading investment bank with operations in the Arab world and beyond, comprehensively covering the Middle East, Africa, Turkey and South and South East Asia," EFG Hermes said in a news release. This strategic alliance will boost the Egyptian economy with foreign direct investment of $250 million and will play a vital role in restoring investors’ confidence in Egypt’s post revolution. The joint venture will potentially play a pivotal role and will be a strong catalyst for speeding up the pledged investments from the Gulf countries, potentially bringing in huge amounts of foreign currency investments into the Egyptian economy

Tanzania:

Week-on-week turnover dropped by 275% to Tshs. 220 million as total volumes transacted shrunk to 462,775 shares compared to 852,884 shares transacted last week. Foreign investors maintained a buy position. 14% of week’s turnover was attributed to the foreign investors. The DSEI gained from last week to settle at 1,457.84 (+0.02%). TSI index closed higher at 1,291.57 (+0.08%) compared with last week’s, mainly driven by TTP and Swissport that closed the week in green at Tshs. 350 and 1,460 respectively. TATEPA ended the week positive with a gain of 7.69% at Tshs.350 per shares, Swissport advanced to 1,460 (+5.80).Other counters remained flat throughout the week. We expect activity in the market to strengthen in the coming week on selected counters. Speculation is still present on TBL and the banking segment counters as investors anticipate the 1H,2012 results for TBL and Q3,2012 results for banks. We anticipate some activities on DCB counter (albeit on the minimal levels) as the company prepares for the rights issue offering due to start on 22nd October 2012. We anticipate seeing similar reflection on a two –year bond to be auctioned Wednesday next week.

Francophone Region:

The market closes down by 0.32% this week at 148.06 points. Losers were: Packaging (-5.22%) brought by the losses of FILTISAC (-5.66%) and SIEM (-4.78%) on low volumes; Agro-processing (-4.53%) was affected by the fall of PALMCI price (-7.69%), SOGB (-6.24%) on low volumes and SAPH (-4.02%). Miscellaneous sector ends at -2.74% impacted by the decline of SIVOA (-5.41%) on low volumes. Transport sector (-0.74%) was influenced by the fall of MOVIS (-2.50%) on low volumes despite the rise of BOLLORE AFRICA LOGISTICS (+1.04%). The winners of the week were: Construction sector (+7.46%), pulled upward by SETAO (+7.46%) benefiting from the Ivorian economic growth that should be drawn first by the reconstruction of the country. SERVAIR ABIDJAN and BERNABE prices respectively increased by 19.60% (due to the recent publication of its half-year results in strong progression) and 2.03%, with the Distribution sector which recorded +3.08%, despite CFAO CI price fall (-7.49%). Telecommunication sector (+0.87%) is influenced by SONATEL (+1.74%). Banking sector (+0.56%) is pulled upward by BOA CI (+5.00%) and BOA NIGER (+2.86%) on low volumes. This week, 327 838 shares were exchanged for a total of XOF 1 700 751 015, most of the transactions concerned SONATEL and PALMCI which represented respectively 65% and 14% of the weekly value traded. The market remains quasi-stable, this is the reflection of the investor’s waits concerning the publication of the H112 results. Some companies like SERVAIR ABIDJAN started issuing their half year results but most of them have not reported as yet.