Global and local market conditions
Most Asian markets declined slightly in the week. Of the three indexes that we track: the Sensex of India fell by 0.62%, and the Nikkei by 0.92%. The Chinese stock market bucked the Asian trend with the SSE Composite rising by an eye popping 8.49%. The Chinese shares rose on expectation of strong corporate earnings and on hopes of further yuan appreciation. Even after the recent strong performance, the Chinese stock market has underperformed other Asian equities.
In Africa, Nigeria’s stock market posted another strong performance. The Nigerian All Share Index moved up 5.49%, driven by a recovery in banking stocks. South Africa’s JSE All Share edged 1.14% hitting the 30,000 mark, which it had last touched in June 2008. The Nairobi 20 Share Index scrapped a 0.12% gain, while the Ghana All Share rose by 0.61%.
Commodity prices have continued to advance driven by strong demand from Asia. Over the last six weeks Crude Oil is up 9.83%, Gold 9.73%, Copper 9.76%, Palm Oil 10.74% and White Sugar 23.75%.
Accra, Ghana
GSE Movers
Top gainers
Unilever Ghana +4.70%, SG-SSB Bank +4.62%
Top losers
UT Bank -8.00%, Ghana Commercial Bank -1.00%
Unilever Ghana
Unilever’s share price has been edging upwards since the big jump in September 10, 2010 on posting excellent half year results. The share is now up 22% over the last 6 six weeks. While the company is not cheap on a pure PE basis, the growth in profits over the last five years (with the exception of 2009) has been impressive. The projected high growth in the Ghanaian economy and the attendant increase in the middle class population will sustain demand for the types of consumer goods that Unilever produces.
Dar es Salaam, Tanzania & Kampala, Uganda
DSE & USE Movers
Top gainer
British American Tobacco +18.75%
Top loser
Uganda Clays -9.09% '
British American Tobacco
The only publicly available information on British American Tobacco Uganda that explains the strong performance of the share is a Bloomberg article which notes that the full-year profit for the year ended December 2009 more than doubled after export volumes and the quality of the green leaf improved. Exports were higher last year, while improvement in leaf quality enhanced British American Tobacco Uganda Ltd’s competitiveness in the global market for its export. An expectation of similarly good results in the course of 2010 could be behind the current demand for this counter.
Lagos, Nigeria
NGSE (Top 100 Market Capitalization stocks)
Top gainers
Intercontinental Bank +20.65%, Cadbury Nigeria +20.39%
Top losers
Beco Petroleum Products -19.40%, Ikeja Hotel -8.33%
Intercontinental Bank
Nigeria’s banking stocks as a whole rose in the week. The Nigerian banking sector stocks were badly battered following a crisis precipitated by careless lending. A big chunk of the lending was on margin loans for purchases of shares on the Nigerian Stock Exchange which is dominated by banking stocks. A fall in the shares triggered by the global credit crisis shrunk the collateral on these loans exposing the banks to huge losses. Several former banking CEO’s including Intercontinental’s are due to stand on trial and could be jailed for careless and fraudulent lending. This week’s price jump is merely a recouping of some of the heavy losses to date. Even after the 20% climb, Intercontinental is still 8% down in the year to date. Nigerian banks are fundamentally strong and well capitalized, and should eventually get back on a sound footing. With the local banking crisis being resolved the share prices should continue recovering albeit with significant volatility.
Nairobi, Kenya
NSE Movers
Top gainers
Housing Finance +12.04%, Olympia +5.80%
Top losers
Scangroup -13.42%, KenGen -7.14%
Housing Finance
Housing finance recently announced a 41% oversubscription for its 7-year bond offering. The company raised Kshs 5 Billion, 80% of which was at a fixed rate of 8.5%. The 8.5% is a big discount to other listed company bonds: Safaricom’s 5 year bond is at 12.25%, KenGen’s is at 12.50%. Housing Finance mortgate rates stand at 15.50%. Assuming a 2% drop in the mortgate rate and 100% lending of the fixed Kshs 4 Billion bond component, the extra annual revenue on the 5% net interest margin will be Kshs 200 Million. This is a significant boost considering that Housing’s 2009 full year profit before tax was Kshs 350 Million.
