Monthly Highlights: April 2008

•  Kenya posted strong performance amid an improved political backdrop
•  Nigeria suffered from supply disruptions in the oil-rich Niger delta
•  Despite post-election violence, we remain encouraged by recent developments in Zimbabwe
 


Kenya posted strong performance amid an improved political backdrop

East African outperformance was driven by Kenya as the NSE20 rose +10.18% on the month. Performance was driven by positive political developments surrounding the composition of a coalition Cabinet and the successful IPO of Safaricom, East Africa’s largest mobile telephone carrier. Mauritius continued to weigh on portfolio performance as local currency appreciation (up +7.64% YTD) remains a cause for concern with export-oriented businesses under pressure and island tourism expected to suffer.

Nigeria suffered from supply disruptions in the oil-rich Niger delta

West Africa underperformed with the NSE All Share dropping -5.87% as event risk caused Nigerian crude oil production to plummet by half. The supply disruption resulted from an oil workers’ union strike at Exxon Mobil and renewed militant unrest culminating in an attack against the Royal Dutch Shell pipeline at Kula. Fortunately, these appear to be exogenous events and we expect the Nigerian economy to resume its upward trajectory. Ghana profited from better-than-expected corporate earnings, stronger cocoa prices and promising new data surrounding its offshore oil deposits as the GSE All Share rose a whopping +22.77% on the month. We remain bullish on Ghana although the market is prone to short-term profit taking as the economy struggles to deal with rapidly accelerating inflation.

Despite post-election violence, we remain encouraged by recent developments in Zimbabwe

Southern Africa performed favorably despite mounting political tension in Zimbabwe. Strength was broad-based as Zimbabwe, Namibia, Malawi and Zambia each posted positive results. Although post-election violence in Zimbabwe has grown more pronounced, we are encouraged by recent developments, including: relaxation of foreign exchange restrictions, increasing likelihood of a political runoff, and refusal by the South African Transport and Allied Workers Union to unload arms destined for the troubled nation. Should economic reform begin to take hold, infrastructure spending will likely play a prominent role as Zimbabwe attempts to develop transport lines and motorways linking South Africa to the rest of the continent.

 

 

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