Monthly Highlights: March 2008

•  Portfolio gains in Ghana & Cote d'Ivoire
•  Profit-taking in East Africa as Mauritius & Kenya came under pressure
•  Zimbabwe elections having positive Portfolio impact although investment climate remains volatile
 

Portfolio gains in Ghana & Cote d'Ivoire

West African outperformance was driven by Ghana as the GSE All Share posted a strong +8.71% on the month. The Ghanaian Cedi’s strength was driven by the BoG’s mid-month decision to hike rates another +75bps as inflation accelerated to +13.2% on the back of soaring commodity prices, in particular petrol. The Portfolio remains overweight Ghana, as valuations are attractive within the continent’s 2nd largest producer of both gold and cocoa. Cote d’Ivoire contributed to West Africa’s strength as President Gbagbo reiterated his commitment to hold presidential and legislative elections by summer. With that nation’s political crisis now in its 6th consecutive year, any promise of economic reform is cause for equity market appreciation with the BRVM Composite rising +4.55% in March. Nigeria dragged down overall performance with the NSE All Share off -2.96% on the month.

Profit-taking in East Africa as Mauritius & Kenya came under pressure

East Africa came under severe profit-taking with Mauritius leading this month’s laggards. Weakness was widespread as both the financial and hotel/property sectors came under pressure with MCB off –7.69%, SBM off –4.21% and NMH off –10.53%. Kenya fared little better with the NSE20 dropping -4.52% as investors sought to raise cash in anticipation of the Safaricom IPO, east Africa’s largest mobile telephone company. Interestingly, all six of the Portfolio’s individual Kenyan holdings were profitable on the month.

Zimbabwe elections having positive Portfolio impact although investment climate remains volatile

Southern Africa drove the bulk of this month’s performance as spillover from the Zimbabwe elections had positive implications for the entire region. With the results still very much in doubt, a stronger than expected showing by Tsvangirai’s MDC could well spell the end of Mugabe’s Zanu PF. The possibility of new government carries the promise of economic reform, and investors flooded into the region during the last week of the month. Zambia benefited from firmer food and copper prices as inflation rose to +9.8% on the month. We suspect Zambia will remain a strong beneficiary of foreign direct investment as an improving political landscape coincides with the need for continued infrastructure spending. This month’s BoZ announcement signaled a shift toward inflation-targeting, and lends credence to the notion that Zambia’s central bank has been operating independently and without significant government influence.