African Thoughts: September 17, 2016


Nigeria:

Things remain dire from an activity point of view in Lagos as turnover increased +45.49% to a rather woeful $29.36m as both foreign and local investors remain on the sidelines. The market managed to close slightly higher with the ASI gaining +0.09%, trimming the YTD loss to -2.73%. The gain can be attributed to banking stocks as the sector closed +3.82% higher with good performances in Zenith (+5.41%), Access (+4.63%) and UBA (+1.92%). Consumers also closed slightly higher with the sector gaining +0.57% thanks to 7UP (+1.20%) and Nestle (+0.70%). The CBN allayed concerns over the soundness of Nigerian banks by assuring the public that they are sound and have strong capital buffers. This, just after Fitch acknowledged that banks in the country had experienced a sharp rise in non-performing loans, adding that other key concerns in the banking industry include Forex scarcity, weakening capital adequacy ratios, and the sovereign’s ability to support banks given its weaker financial flexibility. “If current challenges do not ease, the banks could face further downgrades,” Fitch.

Kenya:

The market managed to close higher for the third straight week with the NSE 20 Index gaining +0.2% (YTD -19.1%). There were good performances from the likes of BMBC (+3.8%) and EQBNK (+3.3%) while KNCB (-2.7%), Safcom (-1.5%) and EABL (-0.4%) came under some pressure. Activity increased +38.5%, but remained woeful at $28.7m for the entire week while net foreign outflows amounted to $9m, which is a 2016 high. Safcom and KNCB dominated what little activity there was and jointly accounted for 56.3% of turnover. Safcom saw the highest net foreign outflows, which amounted to $7.6m.

Zimbabwe:

The market continued to rally last week with the Industrial Index gaining a rather impressive +10.82%, with the YTD loss now being trimmed to only -2.46%. There were some impressive gains in the likes of Econet (+33.52%), Innscor (+23.20%), Delta (+18.38%) and Seedco (+7.76%). Activity also continued to impress, compared to what we have become accustomed to in 2016, with turnover increasing +11% to $5.2m. In case you missed it, here are our thoughts (sent out last week) re what has been spurring the rally in Zimbabwe:

The ZSE has been very strong recently with predominantly aggressive local demand driving this outperformance. The reason for the rise in local demand is due to the soon to be introduced “bond notes”. The idea behind the bond notes (backed by an $US200 million Afreximbank facility, according to the Government, is to provide a 5% export incentive to encourage exports). Nostro account balances for local financial institutions continue to dwindle and the central bank opines that this strategy will be the game changer as far as improving financial flows is concerned. On the downside, however, there are a lot of mistrust issues among investors as they perceive that this is the same as introducing the Zim dollar through the back door. This has resulted in many local funds deciding to hedge this risk through a shift in asset class holdings from cash/near cash to equities. Many foreign investors have used this pick up in both prices and liquidity to take profits and get out of long standing positions. That said, it is not easy to get money out of Zimbabwe and many foreign clients are having difficulties in that regard.

Mauritius:

The market closed the week slightly lower with the Semdex falling -0.64%, cutting the YTD gain to +0.82%. Banking stocks ended the week mixed with MCBG falling -1.8% while SBMH closed unchanged. Hoteliers were also mixed, with LUX gaining +0.4% while SUN and NMH fell -1.5% and -0.5% respectively. It was a rather average week from an activity point of view with turnover amounting to $6m as MCBG and SBMH together accounted for 71% of total value traded.

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