Monthly Highlights: June 2021

•  In West Africa, equity markets recorded mixed performances as Nigeria and the Francophone region closed negative whilst Ghana was positive
•  East African equities were broadly positive returns with only Rwanda (-0.9%) reporting negative returns
•  North African equity markets exhibited mixed performance as the Tunisian and Egyptian equities posted negative returns while Morocco’s positive trend continued for the third consecutive month
•  Southern Africa also posted mixed performance as Zimbabwe, Zambia and Malawi closed higher offsetting negative returns in Namibia and Botswana
 

African stock markets were generally mixed in June, with nine markets posting positive performances in dollar terms led by Zimbabwe (+13.6%) using official interbank rate of ZWL 85.42:USD, Zambia (+8.8%) and Ghana (+7.8%), whilst the biggest losers were Tunisia (-4.0%), Namibia (-3.1%) and Botswana (-2.2%). Zimbabwe’s positive performance came as the International Monetary Fund (IMF) revised the country’s 2021 gross domestic product (GDP) growth estimate upwards to 6.0% compared to its previous forecast of 3.1% citing that Zimbabwe has shown resilience in the face of the Covid-19 pandemic and other exogenous shocks. The growth is expected to be driven by a bumper agricultural output, increased energy production, and the resumption of greater manufacturing and construction activities.

In West Africa, equity markets recorded mixed performances as Nigeria and the Francophone region closed negative whilst Ghana was positive

In West Africa, equity markets recorded mixed performances as Nigeria and the Francophone region closed negative whilst Ghana was positive. The World Bank upgraded Nigeria’s 2021 economic growth forecast to +1.9%, compared with a previous estimate of 1.2%, indicating that food inflation, heightened insecurity and stalled reforms are slowing growth and increasing poverty. Meanwhile, May 2021 inflation rate slowed for the second straight month to 17.9% from 18.1% in April 2021 on lower food prices which dropped from 22.7% to 22.3%. On the earnings front, Flour Mills of Nigeria reported commendable FY21 results (T/O: +34.5% y/y; PAT: +126.1% y/y) which were in line with our expectations driven by impressive top line growth, coupled with disciplined cost control and a 4.1 percentage points decrease in the effective tax rate to 30.9%. In other corporate news, MTN Group received shareholder approval to offer 14.0% of its holding in MTN Nigeria to retail investors in a secondary offering. Africa’s largest mobile operator has a 78.8% stake in MTN Nigeria which will effectively reduce to about 65% and will raise the free float to 35%. In Ghana, 1Q21 GDP grew +3.1% y/y, compared to +3.3% in 4Q20 driven by the agriculture sector (+4.3%y/y), services sector (+4.0% y/y) and industry sector (+1.3%). Ghana’s May 2021 inflation rate dropped to a record low at 7.5% from 8.5% in April, driven by food prices which slowed to 5.4 % from 6.5% in April. Ivory Coast’s May 2021 inflation rate accelerated to 4.2% from 3.9% in April with upward pressure from food and non alcoholic beverages, housing, water and energy and health prices which increased by +7.0% y/y, +4.4% y/y and +0.5% y/y respectively. In Senegal, 1Q21 GDP expanded by +5.1% from a year earlier following a +2.9% expansion in 4Q20 with the strongest contribution coming from the service sector (+4.6%), secondary sector (+7.0%) and the primary sector (+3.0%).

East African equities were broadly positive returns with only Rwanda (-0.9%) reporting negative returns

East African equities were broadly positive returns with only Rwanda (-0.9%) reporting negative returns. In Kenya, June 2021 inflation rate inched to a sixteen month high at 6.3% compared to 5.9% in May and on a monthly basis inflation increased by +0.12% as transport costs rose due to an increase in fuel prices. In corporate news, Equity Group Holdings’ subsidiary, Equity BCDC, announced that it will receive a USD 50m loan from the International Finance Corporation (IFC) to finance small and medium-sized enterprises in the Democratic Republic of Congo. Nation Media Group also announced Kenya's first share buyback programme, targeting to buy back 10% of its issued shares, at a price of KES 25 per share with the maximum number of ordinary shares that may be acquired under the buyback plan being 20,739,652 shares, representing 10% of the firms issued share capital. In Mauritius, 1Q21 GDP contracted for the fifth consecutive quarter by -8.7% from a year earlier, after falling -11.3% in 4Q20 largely attributed to the hospitality sector's poor performance (-82.0%). In other corporate news, SBM Holdings appointed Anoop Kumar Nilamber as the Chief Executive Officer (CEO) of SBM Bank (Mauritius) pending regulatory approvals, Anoop is Airports of Mauritius’s former CEO. Rwanda's 1Q21 economy advanced by +3.5% y/y in vs. -0.6% in 4Q20, buoyed by the industrial sector (+10.0%), in particular construction (+14.0%), manufacturing (+8.0%) and mining (+3.0%). The country’s May 2021 inflation rate fell for the first time in almost three years to 0.1% compared to 2.4% increase in April. Uganda’s 1Q21 GDP growth also increased to +6.2% y/y from +0.7% y/y in 4Q20 boosted by the industrial sector (+11.6%) and the services sector (+6.6%), whilst the agriculture sector contracted by -2.8%. The central bank Monetary Policy Committee (MPC) cut the key interest rate by 50bp to a record low of 6.5%, citing that support is still necessary to underpin economic recovery. Tanzania’s annual inflation rate remained unchanged at 3.3% in May 2021, the stagnation is attributed to an increase in prices of food and a drop in the cost of non-food items, food and non-alcoholic beverages inflation rate increased to 4.9% in May vs. 4.8% in April.

North African equity markets exhibited mixed performance as the Tunisian and Egyptian equities posted negative returns while Morocco’s positive trend continued for the third consecutive month

North African equity markets exhibited mixed performance as the Tunisian and Egyptian equities posted negative returns while Morocco’s positive trend continued for the third consecutive month. The World Bank downgraded Egypt’s real GDP growth forecasts for 2022 to 4.5% down from 5.8% it projected in October 2020, reflecting a retreat in tourism, manufacturing, and oil and gas extraction due to the Covid-19 pandemic, while it maintained the country’s growth projection for 2021 at 2.3%. The Central Bank of Egypt’s (CBE) MPC decided to keep the CBE overnight deposit rate, lending rate, and the rate of the main operation unchanged at 8.25%, 9.25% and 8.75%, respectively. The discount rate was also kept unchanged at 8.75%. Egyptian urban prices accelerated at a fastest pace since December 2020, with prices growing an annual 4.8% in May, compared with 4.1% in April, driven by increases in food and beverage prices by 1.7%. On the earnings front, we digested strong 1Q21 results from MM Group for Industry and International Trade (T/O: +12.7% y/y; PAT: +20.3% y/y) driven by strong revenues from consumer electronics (+14.7% y/y) and automotives (+33.5% y/y), despite a -25.2% y/y revenue decline in the telecom segment. Integrated Diagnostics Holdings (IDH) released excellent 1Q21 results ((T/O: +126.1% y/y; PAT: +230.9% y/y) primarily supported by IDH’s Covid-19-related test offering, as both volumes and price increased. The total tests performed increased by +32.0% y/y and revenue per test increased by +71.0% y/y. Similarly, Cleopatra Hospitals Group's 1Q21 results were impressive (T/O: +25.9% y/y; PAT: +22.6% y/y) as revenue growth was supported by the Groups’ inpatient segment (27% of top line) which grew by +39.0% y/y mainly on the back of a +60.0% y/y increase in the case-mix largely serving Covid-19 cases. Arabian Food Industries reported poor 1Q21 results (T/O: -13.1% y/y; PAT: n/a) as gross profit margin decreased to 20.5% from 24.7%, coupled with EBITDA margin contraction to 4.3% from 9.8% in 1Q20. Dairy products and juices producer, Juhayna Food Industries released impressive FY20 results (T/O: +0.1% y/y; PAT: +33.9% y/y) where slow topline growth was boosted by lower finance costs due to a -43.0% y/y decline in its net debt to EGP 781m. In Morocco, GDP rebounded to +1.0% y/y in 1Q21, after a -6.0% y/y contraction in 4Q20, as a sharp increase in agricultural activities (+20.5%) supported the economy's exit from the Covid-19 induced recession, however the non-agricultural sector still shrank but at a slower pace of -1.4%. Morocco’s central bank maintained the interest rate at an all-time low of 1.5% for the fourth straight meeting. In corporate news, Mutandis announced the acquisition of 100% shares of Season Brand LLC, a company headquartered in United States of America, from RAB Food, which is a US food company affiliated with an investment fund managed by Bain Capital Credit. The Season brand is the leader in the sale of premium canned sardines in the USA. In Tunisia, the central bank MPC also kept the interest rates unchanged at 6.25%.

Southern Africa also posted mixed performance as Zimbabwe, Zambia and Malawi closed higher offsetting negative returns in Namibia and Botswana

Southern Africa also posted mixed performance as Zimbabwe, Zambia and Malawi closed higher offsetting negative returns in Namibia and Botswana. The IMF revised Botswana’s 2021 GDP growth projections upwards to 8.3% vs. April’s 2021 estimate of 7.5%, this will be driven by improvements in the global demand for diamonds, the easing of restrictions on mobility, and the expansionary fiscal stance. Botswana’s central bank kept its benchmark interest rate unchanged 3.75%. Namibia's GDP shrank the fifth consecutive quarter by -6.5% y/y in 1Q21 compared to -5.9% y/y in 4Q20, with poor performance across the major sectors, construction (-23.9%), manufacturing (-22.3%), mining and quarrying (-19.0%), financial services (-13.8%), hotels and restaurants (-12.0%) and transport & storage (-8.7%). In Zimbabwe, we digested solid, inflation adjusted, FY21 results from Delta Corporation (T/O: +39.1% y/y; PAT: +74.1% y/y) driven by strong topline as volumes grew in lager beer (+17.0% y/y), sparkling beverages (+33.0% y/y), African Distillers (+31.0% y/y), Sorghum beer volumes at Natbrew Zambia (+6.0% y/y), whilst Sorghum beer volumes in Zimbabwe declined by -7.0% y/y. Zimbabwe’s central bank maintained the key interest rate at 40% citing slowing inflation and the strong growth path that is underway, as the inflation rate slowed eased to 106.6% in June 2021 from 161.9% in May 2021. Malawi’s annual inflation also slowed to 8.9% in May 2021 from 9.2% in April, driven by lower food price inflation of 11.0% in May, compared with 11.5%, whilst non-food inflation was at 7.1% from 7.0% in April. Zambia’s 1Q21 GDP expanded for the first time in five quarters by +0.7% y/y compared with a contraction of -2.7% in 4Q20, mainly driven by the agriculture sector which grew +1.4% y/y. However, the June 2021 inflation neared a two-decade high at 24.6% y/y vs. +23.2% in May on food inflation (31.2% y/y).