Monthly Highlights: August 2010

•  West African equity markets declined amid bank-related selling pressure in Nigeria
•  East African equities performed well despite broad-based selling across the region
•  South African equity markets remain generally subdued overall
 


West African equity markets declined amid bank-related selling pressure in Nigeria

West African equity markets weakened with the NSE ASI (Nigeria) and BRVM Composite (Francophone) declining by -7.01% and - 1.73% respectively. In Nigeria, weaker oil prices, rising political uncertainty and bank-related selling pressure weighed on equity market performance. Issues surrounding the September margin loan deadline triggered significant selling pressure as Nigerian banks are required to ensure that margin lending is no more than 10% of the bank’s total loan book. Of note, Skye Bank managed to complete its equity placement despite the bank’s poor earnings performance with 1H profits declining by -29%. In other news, Nigeria aims to privatise its power industry with a number of notable investment banks bidding on the business. In Ghana, the GSE ASI rose by +6.76% although the nation’s sovereign debt was downgraded from B+ to B by S&P as the result of deficit-related concerns. In other news, Ghanaian inflation continues to slow and we saw better-than-expected earnings from StanChart Ghana.

East African equities performed well despite broad-based selling across the region

East African equity markets declined with the NSE 20 (Kenya) and SEM-7 (Mauritius) declining by -0.52% and -2.79% respectively. In Kenya, we saw promising results from across the banking sector with StanChart Kenya, KCB and Barclays Bank Kenya each delivering strong earnings. We also saw strong results from consumer-related names such as East African Breweries, Scan Group and Mumias Sugar. That said, telecom bellwether Safaricom came under increased selling pressure with Bharti slashing prices as it aims to prove that its minutes factory model may be successfully employed throughout the East African region. Although we feel that Safaricom is well positioned to defend its dominant position, it is too early to gauge the impact of overall price competition. Shifting to Mauritius, the Minister of Finance announced a USD 400 million economic package designed to mitigate the impact of continued Euro depreciation. In other action, the USE ASI (Uganda) rose by +2.06% and the DSEI (Tanzania) declined by -0.04% on the month.

South African equity markets remain generally subdued overall

South African equity markets were broadly lower with the LuSE ASI down -2.27%, Gabarone DCI down -1.61%, and Malawi DCI unchanged. In Zimbabwe, Delta reported improved earnings although indigenisation concerns continue to discourage foreign investment. In Zambia, Vale and ARM agreed to invest USD 380 million in Zambian copper assets as the South African nation received nearly $2.5bn in foreign direct investment over the first half of the year. In Namibia, Chariot Oil & Gas published the results of its most recent resource mapping survey which effectively upgraded resource potential by 1.5bn barrels to 11bn barrels in total.

 

 

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