Regional stock markets in reverse

Within a broader trend in the emerging/frontier economy space, the three leading stock markets in sub-Saharan Africa all find themselves in negative territory ytd: the Lagos all-share index (NSEASI) and Johannesburg all-share index both by -2.1%, and Nairobi (NSE 20) by -11.0%. Investors track GDP closely: curiously, the IMF’s latest World Economic Outlook, shortly to be updated, sees growth this year and next in Nigeria at 2.1% and 1.9%, in South Africa at 1.5% and 1.7%, and in Kenya at 5.5% and 6.0%. Other indicators enter the equation, of course.

  • NAFEX has proved transformative for the offshore investor in Nigeria. Total transactions on the NSE have averaged US$20.7m equivalent ytd, compared with US$9.9m in the same period of 2017. Momentum, however, is slowing: the average of the past month has been just US$12.8m.
  • If the offshore leads and the local follows, we should note that net offshore inflows in April of N6.1bn became net outflows of N68.8bn in May.
  • Our regular analysis of Pencom monthly reports, most recently yesterday, does not suggest that domestic institutions have made a substantial shift from debt to equities.
  • We feel that much of the good macro news is already reflected in valuations; the disinflation gains since the start of the year, the recovery of oil revenues, the impressive reserves accumulation and the success of the FGN in tapping the Eurobond market. Nor do we have high hopes of the forthcoming Q2 reporting season.

Sources: Nigerian Stock Exchange; Nairobi Stock Exchange; Bloomberg; FBNQuest Capital Research
  • The Ramaphosa bounce in South Africa did not last long: the Jo’burg index has been under water since the start of February. Nigeria has its own elections coming: in our view, investors are not worried while they feel that the polls will be decisive, and not followed by violence and endless judicial challenges.

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