Global and local market conditions
Most of the major developed and emerging stock market indices moved only marginally in the week. The exception was the Bovespa (Brazil) which dropped by 3.2%. The drop in Brazilian equities was triggered by a hike in taxes on foreign fixed-income flows from 4% to 6%. This hike was preceded by several other foreign inflow tax increases over the past year aimed at arresting the appreciation of the real which has gained over 30% against the US dollar in the last eighteen months.
US listed companies reported buoyant third quarter earnings growth. Companies in several sectors of the economy: Amazon (online retailing), KeyCorp (banking), United Parcel (freight), Caterpillar (heavy machinery), Travelers (insurance), Xerox (document management), reported double digit and in some cases triples digit profit growth. A vast majority of the earnings beat Wall Street analysts’ expectations. The strong growth in earnings and the fall in jobless claims reported this week point to an ongoing recovery in the US and global economy.
Tea prices at the Mombasa auction rose by 5% this week, while the volume of tea sold increased by 27% for a second consecutive week. Palm Oil and Arabica Coffee futures prices have been on a gradual rise over the past month and are up 12% and 10% respectively. These movements, if sustained, should augur well for Benso Oil Palm Plantation (Accra), Kakuzi Limited (Nairobi) and Sasini Limited (Nairobi). Crude oil prices dropped marginally in the past two weeks, but seem to be stuck in the $80- $81 range.
Accra, Ghana
GSE Movers
Top gainers
UT Bank +25.00%, Enterprise Insurance +2.94%
Top losers
Aluworks -13.64%, Accra Brewery -8.33%,
UT Bank
UT’s share price leaped on Friday. 11,610,000 shares were traded; an unusually high volume. Accordingly to a Reuters report, an international player is planning to take up a strategic stake in the bank. The huge trade could be the entry of the as yet unknown investor. The current price values UT Bank at a premium to other local listed banks. Using the June 2010 financial results as a base; UT bank’s PE is 18, Ecobank Ghana’s is 13, Ghana Commercial Bank’s is 14 while HFC Bank’s is 11.
Nairobi, Kenya
NSE Movers
Top gainers
Diamond Trust Bank +15.83%, Rea Vipingo Plantations +8.38%
Top losers
Sameer Africa -4.82%, Olympia Capital -4.79%
Rea Vipingo Plantations
Rea Vipingo reported a loss of Kshs 8.1 Million for the first six months of 2010 on falling revenue from sisal leaf harvests and an increase in operating costs. Although the company has a low price to book value of 1.2, the illiquidity of the share and uncertain earnings outlook make this a relatively unattractive stock.
Diamond Trust Bank
While we had anticipated a rise in DTB’s share price, it has been much quicker than expected. The total market value of Kshs 22.6 Billion puts the bank close to overhauling CFC Stanbic bank (at Kshs 24.3 Billion) as the 6th biggest listed bank by market cap. Positive press coverage including news of a Kshs 2 Billion loan facility from the IFC and a general rally in the sector has added fuel to DTB’s share price climb.
