Sub-Saharan Africa Stock Markets 2010 Review & 2011 ... - Imara

EQUITY RESEARCH
AFRICA
FEBRUARY 2011
2010 REVIEW AND 2011 OUTLOOK
The bulk of Africa’s major frontier markets realised a
positive year in 2010, as the world continued to
recover from the bank crisis induced malaise of 2008.
Of the eleven main indices covered in this report, eight
closed the year in the black, while three closed weaker.
East Africa dominated the table, with Uganda and Kenya
coming out number one and number 2 with USD returns of
33.81% and 27.70% over the course of the year. Uganda
was spurred by not only a strong local counter
performance but by the good performance of cross listed
Kenyan stocks which dominate Uganda’s market. Kenya
itself had a positive year boosted by the goodwill
generated by the constitutional referendum and good
economic growth prospects.
Open Close % Change LC % Change USD
UGX-ALSI 732.53 1 188.07 62.19 33.81
NSE-20 3 247.44 4 432.60 36.50 27.70
GSE-ASI 5 572.34 7 369.21 32.25 27.55
NSX-Local 154.77 172.72 11.60 23.29
NSE-ASI 20 827.17 24 770.52 18.93 17.17
Semdex 1 660.87 1 967.45 18.46 16.23
LuSE-ASI 2 794.89 3 322.47 18.88 15.03
BRVM Composite 132.05 159.10 20.48 11.96
ZSE-Industrials 151.89 151.27 -0.41 -0.41
BSE-DCI 7 241.89 6 412.94 -11.45 -8.26
MSE-DSI 4 087.19 3 922.61 -4.03 -9.02
Source: IAS
Anchoring the table were Botswana and Malawi, the
former down 8.26% in USD terms and the latter down
9.02%. Malawi’s exchange continues to be hampered by
liquidity concerns as well as a shortage of foreign
currency which has meant foreign investors have
struggled to exit the market since 2008, which has meant
a continued share overhang over the market, despite the
economy as a whole having another solid GDP growth
year. Botswana’s performance was dragged down by the
financial sector which performed relatively poorly as its
economy continued to try and recover from the drop in
commodity prices that had hammered core diamond
revenues.
We expect the markets to have another good year in
2011, driven by excess liquidity courtesy of various
expansionary monetary policies by many of the world’s
developed markets which have seen interest rates kept at
very low levels, meaning that investors searching for yield
have looked towards the developed and frontier markets.
The commodity price rally is also expected to continue
fuelled by China’s demand, and increasingly from the
likes of India, while SSA’s demographic profile and
improving economic condition will see more investment
into the consumer space as local demand from a growing
middle class increases. GDP in SSA is estimated by the
World Bank to have expanded by 4.7% in 2010, and is
projected to grow by 5.3% in 2011 and 5.5% in 2012 (or
6.4% and 6.2% excluding South Africa), not quite keeping
pace with Asia Pacific growth rates but well ahead of the
rest of the world.
Source: World Bank Global Prospects January 2011
Various S&P Indices Relative to S&P Africa Frontier Index 2010
1.30
1.20
1.10
1.00
0.90
0.80
Risks as always remain, with politics very much in the
spotlight this year as many countries hold elections, but
generally we feel democracy is becoming more
entrenched and this is less of a concern than it may have
been historically. Rising inflation fuelled by soaring world
food prices may also play a role this year, while any
faltering in the global world recovery would weigh against
the positive sentiment.
0.70
S&P 500 S&P Euro 350 S&P Bric 40
S&P Latin America 40 S&P Asia 50 S&P Africa Frontier
2