Monthly Highlights: April 2010

•  Increased profit taking in Nigerian financials
•  Kenya higher on back of strongerthan- expected earnings
•  Investor sentiment in Zimbabwe remains skittish
 

Increased profit taking in Nigerian financials

In West Africa, the GSE ASI rose +8.73% as Ghana’s equity markets continue to power ahead albeit on extremely thin volumes. Favourable macro tailwinds remain supportive with y/y inflation dropping for the ninth consecutive month to 13.3% in March. Looking ahead, Bank of Ghana (BoG) Governor Amissah-Arthur is cautiously targeting year-end inflation of 9.2%. With Ghanaian oil production imminent, the IMF now forecasts +20% GDP growth in 2010 (not including a whopping 50% upward revision of previously understated figures). Ghanaian equity market outperfromance has been led by financials as the banks recently completed a fundraising exercise designed to meet new BoG capital adequacy requirements. Shifting to Nigeria, the NSE ASI rose +1.21% as consumer staples performed well amid increased profit-taking in financials following generally disappointing Q1/10 results. The BRVM Composite rose +0.77% as shares of Sonatel continue to perform well on back of last month’s stronger-than-expected dividend announcement. In addition, Cote d’Ivoire completed its highly anticipated HIPC debt swap as six defaulted issues were converted into a new USD 2.3bn bond (due in 2032) amid 99% participation rate.

Kenya higher on back of strongerthan- expected earnings

In East Africa, the NSE 20 (Kenya) rose +4.18% on the month as improving inflation fundamentals combined with a number of positive earnings announcements. To summarize, investors digested y/y PAT increases of +45.6% for StanChart, +71.6% for Housing Finance, +12.0% for KenolKobil and +217.0% for Limuru Tea. Kenyan equity markets were further supported by shares of Equity Bank as q/q earnings rose +46.7% in Q1/10. On the whole, agricultural and banking performed well whilst other sectors continue to come under selling pressure. In other action, it now looks as if the stage is set for a constitutional referendum, with a vote expected in late July / early August. Although approval of the draft constitution will reduce political instability over the long-term, we expected increased political risk over the near-term as the International Criminal Court is set to commence prosecution of election violence suspects. On the fiscal side, foreign exchange reserves continue to improve and are now at $3.26bn or 4.5months import cover. Shifting to Mauritius, the SEM-7 (Mauritius) rose by +0.64% as weaker European tourist arrivals are expected to weigh on performance in the months ahead. Of note, Mauritius is currently preparing for general elections with the Alliance de L’Avenir expected to win an overwhelming majority of 62 National Assembly seats. In other action, the Uganda ALSI (Uganda) rose by +8.46% and DSEI (Tanzania) declined by –2.71% respectively.

Investor sentiment in Zimbabwe remains skittish

In Southern Africa, Botswana rose +0.52% on back of stronger results from micro lending group Letshego as the company posted a stellar +65.0% increase in net interest income and +73.3% increase in PAT for the year ended 31 Jan 2010. Following the company’s share split, shares of Letshego are trading +20% higher on the month. In Zambia, the LuSE ASI declined by –0.36% as the weaker ZMK weighed on overall performance. In other action, the NSE Local (Namibia), MSE DCI and ZSE Industrial (Zimbabwe) Indices declined by -0.90%, -1.99% and -2.36% respectively in April. We continue to monitor Zimbabwe as investor sentiment remains plagued by Indigenisation-related concerns.