African markets stumbled in July with only four markets returning gains for the month. Tunisia’s TUNINDEX was up on this year’s lows showing gains of 3.52% with Botswana’s Gaborone Index achieving 3.14%. Generating a turnaround from negative figures in June, the Zambia All Share managed growth of 1.6% followed by Tanzania’s DSE Index with 0.4%.
Continuing the bad run in June, Uganda’s All Share plunged a further 8.72% making it the worst performing market in Africa for July. Egypt’s EGX 30 tumbled 7.07% followed by Kenya’s NSE 20 (-5.19%), Namibia’s Local Companies Index (-3.69%) and Nigeria’s All Share at -3.52%.
Global uncertainties continued to drag on markets through July as investors feared a US debt resolution would not come to light while European debt issues appeared to hinder any expansion in the frontier markets for another month running. Localised problems have further exacerbated investor fears as natural and political risks plague certain countries.
Inflation tackling by central banks, most notably in Nigeria and Kenya, reveals the fixed income markets as the market of choice as local equity indices slide.
The Kenyan economy faces daunting circumstances as supply-side factors rack up double-digit plus inflation (15.53%). Unpredictable weather patterns in the drought-stricken North and torrential rains in the South have created knock-on effects throughout the country. Bad harvests mixed with power rationing are placing the country on the back foot with a contraction in manufacturing an unfortunate outcome.
On a positive note, a new mobile banking platform, called M-Pesa launched by Safaricom, is boosting confidence and turnover in the banking sector as the number of bank accounts climbs.
With Kenya’s outlook set to improve in the fourth quarter, annual growth of 4% is expected according to Renaissance Asset Management.
Investor patience within Nigeria’s NSE is being tested as the market continues its slow march south. At considerably discounted prices, low price-earnings ratios, exceptional growth and an undervalued currency, investors are questioning when the market will rebound.
With the Egyptian elections coming up in October, investors are staying clear until stability reigns. The monthly T-Bill auction failed to achieve the US$1.2 billion sought, yet the government declined the US$7.5 billion in aid offered by the IMF and World Bank saying fiscal expenditure needed trimming.
In the same vein, Mauritian ministers including heads of finance, tourism and leisure resigned in July following a dispute between the Mauritius Socialist Party and the coalition government. This comes at a time when tourism appears to be slowing, which has been reflected in market confidence with the Mauritian SEMDEX down 3.35% in July.
Mitigating a rise in imported inflation via food and energy has been a 10.3% appreciation of the Mauritian Rupee against the dollar. Inflation for July stands at 5.5%, yet remains vulnerable to world commodity price fluctuations.
Climbing into the black on the back of a 4% contraction of GDP in the first half of 2011 may be the initial signs of a recovery showing through. Investor confidence was boosted by interim president, Fauael Mebazza’s speech which offered improved security. Approval of two significant loans from the African Development Bank and the World Bank along with an expanded budget by government were key drivers in the market during July. The policy rate was cut by 50 basis points to 4% while confidence in FDI is expected to aid recovery by year end. Top performing shares for July were Société Tunisienne d’Entreprises de Télécommunication (21.53%), Société Nouvelle Maison de la Ville de Tunis (16.61%), and Société Magasin Général (12.94%). With government elections being postponed for a further three months until October 23rd, it is possible that the rebound may be delayed.
Facing head-on winds in 2011, Uganda’s equity market suffered significant losses in July. Inflation reached 18.7% by month end, driven mostly by a 42.1% rise in food prices. Monetary authorities altered the policy rate up 32 basis points to 17% in early July.
Pressure on the currency has forced a 10% devaluation of the Ugandan Shilling against the dollar over the past two months. Increased imports and the risk-off capital flight by foreigners have contributed greatly to this impact. Despite these hardships, Uganda’s economy expanded by 6% year-on-year in the first quarter of 2011. Copyright. HedgeNews Africa – July 2011.
|Country||Local Index||Local Index return (JUL)||Local Index (YTD)|
|Ghana||GSE Composite Index||-1.41%||17.99%|
|Namibia||Local Companies Index||-3.69%||5.87%|
|Malawi||Domestic Companies Index||-0.22%||-0.90%|