African Thoughts: September 17, 2012

Fed easing plan spurs risk rally, dollar slips…

See below for best and worst performers on the continent for last week.

Zimbabwe:

Zimbabwe, the mainstream index rose by 1.76% in the week. This was as a result of increases in the prices of Innscor (+8.33%) to 65 cents; OK Zimbabwe (+6.67%) to 12.8 cents and Colcom (+15.38%) to 30 cents. These three counters constitute 14% of the index. Innscor was propelled by the good numbers that it posted for the year ended 30 June 2012. OK Zimbabwe rose as the market anticipates good numbers for the 6 months to 30 September 2012. The resource index however retreated by 8.75%on the back of losses in Falgold (-35.5%) to 12.9 cents and Hwange (-4.65%) to 20.5 cents despite no changes in fundamentals. Mining Indaba Highlights: The government’s Diamond policy was approved and is now in place. The new policy is aimed at facilitating the optimisation of diamond exploration, attracting local and foreign investment and addressing structural deficiencies in the current legislation. The government also highlighted it had embarked on amending the Precious Stones Trade Act which will see one legislative framework for all precious stones rather that legislation for individual precious stones. The new legislation would be dubbed the Precious Stones Act. The Insurance and Pensions Commission (IPEC) has hiked the minimum capital threshold for Insurance companies to a maximum of $US 3,000,000 from $US 300 000. The minimum capital requirements for Reinsurance companies were raised to $US 3,000,000 from $US 400,000, while the same requirements for Short Term Insurers were hiked to $US 2,000,000. Operators are expected to be half compliant with the new capital requirements by 31 December 2012 with full compliance expected by 31 December 2013. Listed companies that will be affected are Nicoz, Afre, FBC, CBZ, Afre and Zimre – who are all fully compliant. New equities exchange market for Parastals is on the cards to raise capital for the ailing state entities and Parastatals. This comes on the back of stringent listing requirements on the ZSE that hinders the Parastatals from listing. Most Parastals are undercapitalised and are in dire need of recapitalisation. We expect the strong demand for blue chip counters that was witnessed in the market last week to remain for the coming week. Foreigners who have been playing a key role in the market and accounting for +/- 70% of the trades will likely remain the major drivers in pursuit for counters such as Delta; Econet and Innscor.

Nigeria:

Nigeria, the Market was mostly bullish last week with the index gaining 2.01% to close at 25,337.18 and the market cap gaining N158.69 billion to close at N8.066 trillion. Value traded was down 40.60% to N14.252 billion from N23.994 billion. The financial services sector drove volumes last week, making up 84.55% of the total volumes traded. The most active stocks by volume were Cornerstone Insurance, Zenith Bank and Access Bank. Results released were Access Audited HY and Dang Flour unaudited Q1. Things to note in the news were: Nigeria secures $1.1billion China EXIM Bank infrastructure loan; Flour Mills commissions N10.5billion 2,500MT milling complex; BAGCO to delist from the NSE after Flourmills merger and External reserves rise to two-year peak of $39.758 billion on crude oil price rise. This week, we are expecting to see a continuation of the profit taking we witnessed last Friday. The MPC meeting starts today and we are expecting a downward revision of the rates following the fact that inflation has eased to 11.7%. The first phase of market making starts in Nigeria tomorrow.

The market ended the last week (Thursday) +1.66% on very strong volumes, this came after the news release that that US debt relief plan could go to Congress soon, Italy may convert USD100 million of debt into grants and Germany will forgive USD340 million debt, all these events paved the way to the optimistic sentiments that were prevalent. Adding to this OCIC made a filing on demerger with Egyptian stock exchange with a book value to split 86:14 between fertilizers and construction, this is an long awaited catalyst for name which expected to effect the entire market.

Kenya:

Kenya, the NSE 20 index was on an uptrend last week closing at 3953.53, a gain of 1.38% from the previous week. Market activity has increased substantially as selective counters on the bourse registered notable foreign activity. Total foreign bids this week stood at KES 2.5B as offers totaled KES 661M. SCOM, EABL and KCB were among the favourite stocks for foreigners. We expect the market to continue being robust. We expect activity to be especially pronounced on counters with upcoming book closures for dividend payments including Jubilee holdings and EABL. On Wednesday 19th September, the books will close for Standard Chartered rights issue and as such we expect increased speculative demand for the counter. Financial results are expected for stocks such as Kengen and KPLC while the banking sector approaches the end of the third quarter accounting period. All these are set to increase market activity in the coming weeks. The falling fixed income yields support more funds being diverted to the equities market. The Foreign investor participation will continue being felt in the market in the approaching week.

Mauriritius:

Mauritius, the all-share index grew by 0.4% to 1,702.24 points. The SEM-7 index gained 0.2% to 331.28 points. Turnover on the market amounted to US$9m. Foreign investors were net sellers by $43k. Foreign direct investment in Mauritius went up by 19.8% for H1 2012 to reach $137m.

Botswana:

Botswana, the week under review saw an improvement in the traded volumes, with overall turnover topping P12.7 million. The DCI closed the week higher, gaining by 0.54% to close at 7361.27 points. Top amongst the movers was Choppies which went up by a huge 7.7% on the back of at least 2 million shares traded to settle at 180t. Letshego slid by 1.4% to settle at 138t, despite a trading update that its profit after tax is likely to be in the 9% to 10% region higher than the previous financial period. Going forward we expected the market to continue being driven by the earnings results, with most stocks having so far reported a mixed set of results. Choppies and Barclays, are expected to announce soon.

BRVM:

BRVM, the composite decreased marginally -0.03% last week. Sectors with the greatest losses were: Textile sector (-7.45%) - suffered losses on UNIWAX (-7.45%) on low volumes; Telecommunication sector (-2.25%) suffered from depreciation of ONATEL’s price (-4.44%) also on low volumes. The market was supported by the following sectors: Infrastructure sector (+5.39%) benefiting from the investments in the sector since the beginning of the year led by CIE (+11.07%); Miscellaneous sector (+4.89%) with SICABLE winning 10.77% on low volumes. The Agro-Processing sector (+1.22%) saw SOGB appreciate by 6.78% on low volumes while PALMCI lost 1.71%. Most of the week’s transactions were SONATEL, representing 55% of the weekly value traded. Côte d'Ivoire presented last Wednesday at its National Agricultural Investment Program (NAIP). They are looking for $4 billion to upgrade the sector and ensure food security. NAIP "wants to reach an agricultural growth of 8.9% to ensure food security in Côte d'Ivoire and to contribute significantly to the West African sub-region", said the Ivorian Minister of Agriculture, Mamadou Coulibaly, at the opening of a meeting of international donors. Participants include the European Union, the United Nations Organization for Agriculture and food (FAO), the African Development Bank (ADB). NAIP is also intended to contribute to "a reduction in the poverty by 50%, currently at 16% by 2020", added Mr. Coulibaly, highlighting that this reform should result in "modernization of the agricultural sector of the country little mechanized and suffering from a lack of public investment".

Tanzania:

Tanzania, weekly turnover +3.05% compared to the previous week’s performance. All Indices closed the week in the red. The TSI settled at 1,267.53 (-0.82%) while the DSEI closed at 1,452.15 (-0.17%). Both Banking and Industrial indices were down on the backdrop of losses in CRDB and TBL – the two counters lost (-2.22%) and (-2.29%) respectively. All other counters remained flat. Banks accounted for 87% of the week’s total volume traded and 58% of the market value.