There are 54 independent countries in Africa and over 20 different stock markets. As of the end of June 2011, the overall combined growth rate for all African stock markets was down about 25%. While it is always nice to see growth in stocks, the 25% drop is no reason for panic in these markets where countries are still stabilizing and new economic policies are still being implemented.
Eric Musau, a research analyst with African Alliance Kenya Investment Bank in Nairobi, highlights some of the top performers, mostly from the southern African markets, “If you look at Mauritius, Zimbabwe, Botswana, and Namibia, those tended to do quite well. If you’re looking at the top gainers, Ghana in east Africa was one that did well, that was up about 5.7%.”
There were a variety of factors that contributed to Ghana’s success so far this year. “I think from a micro-perspective, Ghana has benefited quite significantly. If you look at the discovery of oil, the currency is quite stable and the political situation there has really improved, this is (attracting) investors (who) are looking over the long term, so we’re seeing a lot of interest in that market.”
While Zimbabwe did have three of the worst performing companies in its market; the country’s cable companies, power equipment suppliers, and investment companies did quite well. “Things are starting to pick up in Zimbabwe and there is opportunity coming up,” Musau says.
The key, low performing markets were Zambia, Egypt and Kenya. Egypt obviously struggled because of its political transition, which caused the market to be closed for the first part of the year. “It’s been a challenging period, but companies individually appear to be doing relatively well,” says Musau.
Africa has been through a lot over the past two decades and as governments and economies have started to stabilize, opportunities have started to open up. “There have been a lot of changes within Africa that have been positive,” says Musau. “Most of the countries are now really forming their economies and privatization has been geared up quite significantly in East, West, and Southern Africa, so this presents opportunities…There are really quite a number of opportunities across the continent; it’s just a matter of being able to make the right choice.”
Going forward for the rest of the year Musau believes that, “Holding on around these levels would be very good. We’ve had quite a bit of challenges in North Africa. In East Africa, inflation is a big concern, interest rates are going up. Currencies are also a problem; we’ve seen the Kenyan currency depreciate about 13%.” However, Masau notes that things look good down the line, in one or two years, in countries like Kenya were the fundamentals are good.
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