Image Image Image Image Image Image Image Image Image Image Image Image

AfricaMoney | August 20, 2017

Scroll to top

Top

No Comments

Stocks in Sub-Saharan Africa to face slower growth in 2014

Stocks in Sub-Saharan Africa to face slower growth in 2014

Amid this slowing market, analysts peg Mauritius’ banking major Mauritius Commercial Bank, Rwanda’s Bank of Kigali and Botswana microfinance company Letshego as the stocks most likely to make a mark in 2014.

African stocks appear to be losing steam, after a tough 2013 on the back of the Kenya shopping mall attack, violence in the Central African Republic and fighting in South Sudan, and look likely to achieve lower gains in the current year.

Amid this slowing market, analysts peg Mauritius’ banking major Mauritius Commercial Bank, Rwanda’s Bank of Kigali and Botswana microfinance company Letshego as the stocks most likely to make a mark in 2014.

Last year, inflows into sub-Saharan African equity funds slowed to $1 billion from more than $3 billion in 2012, according to Boston-based fund tracker EPFR.

Sluggish growth was also indicated in the MSCI Frontier Market Africa index – comprising Kenya, Mauritius, Nigeria and Tunisia – which rose only 31.01% last year after a 53.97% leap in 2012. However, the MSCI Frontier Market Africa Index still outperformed the overall MSCI Market Index, which grew 26.32% in 2013.

As Sub-Saharan equity funds appear set for a muted 2014, investors eyeing Africa will need to be more discerning than ever before as they look beyond blue-chip companies in major markets like Kenya.

Investors stand their best chance to make gains in 2014 by either eying smaller companies in major markets like Kenya or moving towards less familiar markets altogether, like Botswana or Zimbabwe.

Incidentally, the one country in Sub-Saharan Africa that looks set to keep investments coming is Nigeria. Some of the best performing funds so far have been in the booming West African economy, with GT Bank surging 90 percent over the past two years while Nestle Nigeria has nearly tripled.

And, Nigeria just got another pat on its back, having been included in esteemed economist Jim O’Neill’s grouping of the world’s most promising economies.

The economist, whose claim to fame is to have coined the widely used acronym BRIC (Brazil, Russia, India, China), has now come up with the MINTs grouping, comprising Mexico, Indonesia, Nigeria and Turkey.

2014 holds promise for Nigeria, whose weighting in the MSCI Frontier Market Index should increase from 14% to 20%. The United Arab Emirates and Qatar are likely to be upgraded from frontier to emerging markets segment in May, ensuring that the frontier markets category sees Nigeria attracting more attention from both dedicated emerging market and larger global investors.

Moreover, a Central Bank of Nigeria report recently noted that the country is largely unbanked, with fewer than 30 million bank accounts for Nigeria’s 160 million population, pointing to significant room for growth in the banking sector.

But, analysts also stress the drawbacks of inadequate infrastructure in Nigeria, particularly in the power sector, along with concerns about the impact on the economy of presidential elections next year, and a change in central bank governor this year.

Nigeria is Sub-Saharan Africa’s largest market after South Africa, which is an emerging market, unlike the West African economy which is still only a frontier market.

But, with daily turnover on Nigeria’s flagship Lagos stock market less than $30 million, its appeal to large international investors is limited. Unfortunately, the low turnover holds true across other Sub-Saharan markets like Kenya and Mauritius as well, among others.

In the meantime, economic growth at least continues to be buoyant, as the International Monetary Fund forecasts economic growth in sub-Saharan Africa will accelerate to 6 percent this year, from an estimated 5 percent in 2013.

Source: Reuters

Submit a Comment

Directory powered by Business Directory Plugin