The Sunday Mail
FROM Cape to Cairo, African stock markets have in the last two years declined sharply due to increased foreign capital flight.
Asset values have plunged, with six of the seven top markets in Sub-Saharan Africa (SSA) falling between 3,2 percent and 14 percent since the beginning of the year, according to African Financials, a global firm that tracks stock markets on the continent.
In the past year, local stocks have dropped faster, down 41 percent, followed by Kenya with a 19,2 percent decline.
Nigerian shares have plummeted 16,8 percent during the past 52 weeks (one year) while those in Zambia and Mauritius have lost 10 percent and 8,7 percent respectively.
South Africa’s stock market —the largest on the continent — is down 6,8 percent year-on-year.
However, stocks in Botswana have climbed 7,2 percent in the period.
Experts say investors are unnerved by Africa’s commodity-based economies that are reacting to slowing growth in China, the world’s largest consumer of minerals.
Global commodity prices reached their peak in 2011/12 and since then prices have seen a decline that has negatively impacted on economies that heavily rely on commodities.
Brokerage firm IH Securities said the generally poor performance in stock markets is largely driven by poor earnings performance, negative sentiments towards SSA markets, subdued GDP growth and constrained liquidity.
SSA average GDP is expected to grow by 4 percent in 2016 while South Africa is expected to jump by 1,3 percent.
Further, the US interest rate hike to 0,5 percent from 0,25 percent last year has proved difficult to resist, as concern on the health of the global economy continues.
With the US dollar firming, currencies in countries like Zambia and South Africa plunged by up to 25 percent in 2015, forcing investors to shift funds into American bonds and gold. These are seen as a safe haven during times of financial uncertainty.
Equities analysts are downbeat on the region’s growth prospects as the rout of commodities has continued on the international market.
This will likely further rattle Africa’s markets which heavily rely on foreign capital.
“Weak commodity prices and the ramifications of a stronger US dollar in 2016 will likely have negative implications for flows into emerging and frontier markets, with flow likely to favour developed markets again in 2016,” said IH Securities in a recent research note.
Investments and equities analyst, Mr Albert Norumedzo said poor growth prospects in the SSA are having a contagion effect on industries and their securities exchanges.
“Equities markets mirror the general economic performance of a particular country or region. Prospects for the region are not good due to the falling prices of commodities, yet the SSA is a commodity dependent region.
“This is also a reaction to what is happening to the global economy, especially the slowdown in the Chinese economy.
‘‘The global economic shocks have not left out African markets,” he said.
The current El-Nino induced drought on agriculture is also expected to have a negative knock on many economies.
The World Bank forecasts that commodity prices will rebound marginally in 2016 with the exception of commodities such as gold and crude oil, whose prices are projected to continue declining.
This, analysts have said, may further weaken regional markets.
