You can run but you can’t hide

The dollar has become king despite the attempts of President Donald Trump to talk it down while emerging and frontier markets have taken a kicking. The sell-off in May has since developed a second and third leg. The three leading stock markets in sub-Saharan Africa have followed the trend. The Lagos all-share index (NSEASI) has lost 12.1% ytd, Nairobi (NSE 20) 17.3% and the Johannesburg all-share 4.1% in local currency terms. In this environment there is no hiding place for Lagos and Nairobi, and seemingly a little protection for Jo’burg (see below).


  • Beyond the broader trend, we can see that policy issues have sometimes played their part. In the case of Turkey, we can point to question marks surrounding the independence of the central bank and the diplomatic spat with the US over a pastor under house arrest.


  • In our three markets there are no such powerful contributory factors. Some offshore institutional investors may wince at the news headlines surrounding the largest non-oil company in Nigeria. They may also voice their concerns over the forthcoming elections although we would argue that precedent suggests such concerns are overdone. The latest participation report from the Lagos bourse shows there was a net inflow of foreign monies in July, albeit of just N3.5bn amid thin liquidity.


  • Daily turnover in Nairobi has also been thin, averaging KES950m (US$9.5m) in the first four months of the year and KES600m in the period since.
Performance of three SSA market indices, 2018 (% chg ytd, local currency units)

Sources: Nigerian Stock Exchange; Nairobi Stock Exchange; Bloomberg; FBNQuest Research
  • The chart shows that the hit taken by the Jo’burg exchange has been far more gentle than that for the two other markets. Since the start of May the JSE has been flattish while the currency has depreciated by more than 20% vs the US dollar. The yields on the benchmarks R186 (maturity 2026) and R208 (2021) have widened by 82bps and 64bps respectively. The South African rand has again confirmed its (involuntary) status as the proxy for EM risk.

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