Global Equity Markets
Most of the developed world’s equity markets began 2011 on a positive note. The S&P 500 was up 1.49% in January, Japan’s Nikkei advanced by 1.28%, while the UK’s FTSE declined slightly, falling 0.31%. The US market seems to be driven by strong corporate earnings reported in January: several companies reported double digit increases in profits. The unemployment figure reported on February 4th fell to 9%, a much more positive number than the 9.4% market consensus.
The story was not as rosy in the main Emerging Markets. China’s Shanghai SE Composite Index finished flat in the month, South Africa fell by 1.79%, Brazil’s Bovespa fell 3.76% while India’s Sensex dropped by a huge 10.3%. Emerging markets have borne the brunt of the political crisis in Egypt; there have been huge outflows of funds from Emerging Markets especially across the Middle East.
Emerging Africa Equity Markets
Nigeria’s NGSE All Share Index jumped by 10.44% in January. The increase in the Nigerian share index was driven by gains in banking stocks which had fallen to historical lows over the previous two years. The first two weeks of January 2011 were particularly strong; the gains for the month were tempered by a fall in the last week attributable to the ongoing fallout in Egypt.
Ghana moved to a weighted average formula for calculation of its stock exchange indexes. The GSE index was reconstituted with a base of 1,000 as at December 31, 2010. The GSE Composite index rose by 5.30% in January 2011, and kept up with a positive momentum in the first week of February even as other African markets softened. The World Bank projects that Ghana will be the world’s fastest growing economy in 2011, with a growth rate of 13.40%. Ghana has benefited from the rise in Gold and Cocoa prices and is projected to grow even faster now that oil production has commenced. In a report released on January 6, 2011, the Economist projects that Ghana will be among the ten fastest growing countries in the world in the next ten years with a growth of about 7% per annum. Other African countries that make the list are: Ethiopia, Mozambique, Tanzania, Congo, Zambia and Nigeria.
Kenya’s NSE 20 share index eked a 1.46 % gain in January 2011. After leaping 4.27% in the first week of the year, the market declined over the following four weeks. The NSE index fell by a further 2.37% in the week ending February 4th. There has been a heating up of the political environment with the key protagonists eyeing the presidential elections due in 2012. Rainfall has been poor for the last few months; drought has been reported in several areas on the country. Kenya is highly dependent on rainfall; poor rains have a huge negative impact on several sectors of the economy from agriculture to power generation. Strong earnings from the banking sector should lift the market towards the end of the February and early March.
Commodities
Crude oil prices which were already high advanced by 2.81% to over USD 97 per barrel in the Brent Oil Market. Oil prices were pushed up in 2010 by strong demand from the fast growing Asian economies. Crude oil prices spiked due to the political unrest in North Africa. There have been fears that the protest in Egypt will lead to the closure of the Suez Canal which would disrupt oil supplies.
Copper prices declined by 1.67%, and Gold by 5.65%. Gold prices are expected to stay at an elevated level due to ongoing economic uncertainty.
Agricultural commodities rose further in January. White Sugar futures due for delivery in March rose by 4.75% in the course of January. Arabica coffee futures advanced by 1.87%, wheat by 3.97%. Cocoa futures price rose by 7.29%. Cocoa prices soared after Alassane Ouattara, the internationally-recognized president of Cote d'Ivoire, called for a month-long ban on exports from the world's top cocoa producer. Cocoa prices are now at a 30 year high.
Kenyan tea prices are not enjoying the general rise in commodity prices. The price over the last few weeks has hovered at around USD 3 per Kilo at the Mombasa auctions, similar to the price range for the latter part of 2010. Volumes sold have plummeted by over 25% compared to the weekly average in 2010. There is low demand at the auction due to the absence of Egypt (hitherto the leading importer of Kenya tea).
Currencies
The Kenyan Shilling held steady against the dollar in the month of January but fell against the British Pound and the Euro by 3.25% and 3.2% respectively. The South Africa Rand fell by 5.98% against the Kenya Shilling in January 2011 after notching up a 20% gain in the course of 2010. South Africa’s currency has been among the best performing in the world on the back of a global commodities boom. South Africa has the highest reserves of precious metals in the world and they all rose by double digits in the course of the last year.
The Ghanaian Cedi dropped by 1.41% against the US Dollar in the whole of 2010, and by a further 1.39% in the course of January 2011. This has been a strong performance given that the US dollar strengthened significantly against most global currencies in the two years to 2010 due to its safe haven status in times of economic turmoil. There is a great likelihood of the Cedi strengthening against most of the developed countries’ currencies as the economic boom in the country gathers steam.
Equity Markets big movers January 2011
Accra, Ghana: GSE
Top gainers
Aluworks +58.33%
CFAO (Ghana) +50%
Cocoa Processing Company +50%
Top losers
Starwin Products Limited -40%
Golden Star Resources -11.86%
AngloGold Ashanti -8.33%
Aluworks
The huge jump in Aluworks can be attributed to a reversal of a steep drop in the company’s share price in the last two months of 2010. The market sentiment has been positive and bargain basement stocks such as Aluworks seem to be the biggest beneficiaries of the rally. The company reported a loss in the nine months to September 2010 and there are hopes that the company might return to profitability after reopening a previously closed smelter. Even after the huge rally the share will need to climb another 38% to reach the level it was at the end of September 2010 when the stock’s decline commenced.
CFAO (Ghana)
The company announced that it will delist from the Ghana Stock exchange. The company will be offering four Ghana pesewas per share. At the time of the announcement the shares were trading at two pesewas. The counter is illiquid with very few shares changing hands in recent weeks. Most shareholders would rather holdout for the payout rather than sell at a discount of 25% to the delisting offer price.
Cocoa Processing Company
At a price of only three pesewas per share, a one unit movement either way will have a dramatic impact on the company’s share price. Trading on this counter is thin and as a result huge swings in the share price are to be expected.
Golden Star Resources
The gold miners dropped in January in tandem with the softening of gold Prices in the global market. Signs of economic recovery in the United States and other major economies have slightly reduced the luster of gold as a hedge against inflation. However, most commodities analysts expected prices to remain elevated in the months ahead as inflation takes root in emerging economies and as the developed economies maintain expansionary monetary policies.
The GSE performed strongly as whole: notable climbers included SG-SSB Ltd up 31.03%, CAL Bank up 30% and Ghana Oil up 24%. The decline by AngloGold (which due to its huge capitalization comprises a big component of the GSE All share index) masked what was an outstanding rally in January 2011.
Nairobi, Kenya: NSE
Top gainers
East African Portland Cement +48.75%
Kapchorua Tea +30%
National Bank +17.42%
Top losers
Sameer Africa -16.88%
East African Breweries -8.46%
Mumias Sugar -8.25%
East African Portland Cement
East African Portland Cement (EAPC)’s share price dropped in the last quarter of 2010 after reporting a loss for the year ended June 2010. Sales volumes were up but the company was hit by a foreign exchange loss on its un-hedged Yen denominated loan (The Yen rose strongly in 2009/2010 due to its safe haven status: the Yen was one of the few developed market currencies to rise against the US Dollar in the previous tumultuous three years). The management announced steps to redenominate the loan to USD or have a hedge of some sort. The surge of the company’s share is partially a recovery from the 2010 lows.
Going forward the cement sector should perform strongly. From the beginning of January 2010 to the end of January 2011 Athi River Mining rallied by 70%, Bamburi Cement by 27%. Bamburi has a high dividend yield (about 5% at current prices). The ongoing housing boom in the East African region will benefit all the three companies plus other players such as Tororo Cement who have recently set up shop. The current huge infrastructure projects in Kenya and the expected building up of Southern Sudan after secession should be positive for the cement sector.
East African Breweries
The company’s share price has been hit by announcement of a new law to limit drinking hours in Kenya. The impact of such a law is likely to be limited at least in the long term. Limited drinking hours in the United Kingdom for instance do not appear to have had any impact on the drinking culture in that country. EABL is one of the best run companies in the region, with a strong management and well received brand. EABL is a virtual monopoly in Kenya, has a strong presence in Uganda and makes significant exports to neighboring countries. In late 2010, the company regained entry into the Tanzanian market with a purchase of 51% of Serengeti Breweries. A defensive stock with a decent dividend yield (4.2% at the current price), further drops in the share price should be treated as buying opportunities.
Mumias Sugar
The company’s share price dropped after announcing that that half year profit to December 2010 had declined by 22%: heavy rainfall had hampered sugarcane deliveries. The company’s management expects a much better second half and projects that the full year profits will be higher than for the prior year. Global sugar prices are at a record high. Sugar price hit a 30 year in February on supply concerns after the floods in Australia. The share trades at a PE of just 8.7, making the current price a good entry point. The 4.47% dividend yield is attractive.
Quote
There is nothing wrong with learning from hindsight. : Akan Proverb
Most of the developed world’s equity markets began 2011 on a positive note. The S&P 500 was up 1.49% in January, Japan’s Nikkei advanced by 1.28%, while the UK’s FTSE declined slightly, falling 0.31%. The US market seems to be driven by strong corporate earnings reported in January: several companies reported double digit increases in profits. The unemployment figure reported on February 4th fell to 9%, a much more positive number than the 9.4% market consensus.
The story was not as rosy in the main Emerging Markets. China’s Shanghai SE Composite Index finished flat in the month, South Africa fell by 1.79%, Brazil’s Bovespa fell 3.76% while India’s Sensex dropped by a huge 10.3%. Emerging markets have borne the brunt of the political crisis in Egypt; there have been huge outflows of funds from Emerging Markets especially across the Middle East.
Emerging Africa Equity Markets
Nigeria’s NGSE All Share Index jumped by 10.44% in January. The increase in the Nigerian share index was driven by gains in banking stocks which had fallen to historical lows over the previous two years. The first two weeks of January 2011 were particularly strong; the gains for the month were tempered by a fall in the last week attributable to the ongoing fallout in Egypt.
Ghana moved to a weighted average formula for calculation of its stock exchange indexes. The GSE index was reconstituted with a base of 1,000 as at December 31, 2010. The GSE Composite index rose by 5.30% in January 2011, and kept up with a positive momentum in the first week of February even as other African markets softened. The World Bank projects that Ghana will be the world’s fastest growing economy in 2011, with a growth rate of 13.40%. Ghana has benefited from the rise in Gold and Cocoa prices and is projected to grow even faster now that oil production has commenced. In a report released on January 6, 2011, the Economist projects that Ghana will be among the ten fastest growing countries in the world in the next ten years with a growth of about 7% per annum. Other African countries that make the list are: Ethiopia, Mozambique, Tanzania, Congo, Zambia and Nigeria.
Kenya’s NSE 20 share index eked a 1.46 % gain in January 2011. After leaping 4.27% in the first week of the year, the market declined over the following four weeks. The NSE index fell by a further 2.37% in the week ending February 4th. There has been a heating up of the political environment with the key protagonists eyeing the presidential elections due in 2012. Rainfall has been poor for the last few months; drought has been reported in several areas on the country. Kenya is highly dependent on rainfall; poor rains have a huge negative impact on several sectors of the economy from agriculture to power generation. Strong earnings from the banking sector should lift the market towards the end of the February and early March.
Commodities
Crude oil prices which were already high advanced by 2.81% to over USD 97 per barrel in the Brent Oil Market. Oil prices were pushed up in 2010 by strong demand from the fast growing Asian economies. Crude oil prices spiked due to the political unrest in North Africa. There have been fears that the protest in Egypt will lead to the closure of the Suez Canal which would disrupt oil supplies.
Copper prices declined by 1.67%, and Gold by 5.65%. Gold prices are expected to stay at an elevated level due to ongoing economic uncertainty.
Agricultural commodities rose further in January. White Sugar futures due for delivery in March rose by 4.75% in the course of January. Arabica coffee futures advanced by 1.87%, wheat by 3.97%. Cocoa futures price rose by 7.29%. Cocoa prices soared after Alassane Ouattara, the internationally-recognized president of Cote d'Ivoire, called for a month-long ban on exports from the world's top cocoa producer. Cocoa prices are now at a 30 year high.
Kenyan tea prices are not enjoying the general rise in commodity prices. The price over the last few weeks has hovered at around USD 3 per Kilo at the Mombasa auctions, similar to the price range for the latter part of 2010. Volumes sold have plummeted by over 25% compared to the weekly average in 2010. There is low demand at the auction due to the absence of Egypt (hitherto the leading importer of Kenya tea).
Currencies
The Kenyan Shilling held steady against the dollar in the month of January but fell against the British Pound and the Euro by 3.25% and 3.2% respectively. The South Africa Rand fell by 5.98% against the Kenya Shilling in January 2011 after notching up a 20% gain in the course of 2010. South Africa’s currency has been among the best performing in the world on the back of a global commodities boom. South Africa has the highest reserves of precious metals in the world and they all rose by double digits in the course of the last year.
The Ghanaian Cedi dropped by 1.41% against the US Dollar in the whole of 2010, and by a further 1.39% in the course of January 2011. This has been a strong performance given that the US dollar strengthened significantly against most global currencies in the two years to 2010 due to its safe haven status in times of economic turmoil. There is a great likelihood of the Cedi strengthening against most of the developed countries’ currencies as the economic boom in the country gathers steam.
Equity Markets big movers January 2011
Accra, Ghana: GSE
Top gainers
Aluworks +58.33%
CFAO (Ghana) +50%
Cocoa Processing Company +50%
Top losers
Starwin Products Limited -40%
Golden Star Resources -11.86%
AngloGold Ashanti -8.33%
Aluworks
The huge jump in Aluworks can be attributed to a reversal of a steep drop in the company’s share price in the last two months of 2010. The market sentiment has been positive and bargain basement stocks such as Aluworks seem to be the biggest beneficiaries of the rally. The company reported a loss in the nine months to September 2010 and there are hopes that the company might return to profitability after reopening a previously closed smelter. Even after the huge rally the share will need to climb another 38% to reach the level it was at the end of September 2010 when the stock’s decline commenced.
CFAO (Ghana)
The company announced that it will delist from the Ghana Stock exchange. The company will be offering four Ghana pesewas per share. At the time of the announcement the shares were trading at two pesewas. The counter is illiquid with very few shares changing hands in recent weeks. Most shareholders would rather holdout for the payout rather than sell at a discount of 25% to the delisting offer price.
Cocoa Processing Company
At a price of only three pesewas per share, a one unit movement either way will have a dramatic impact on the company’s share price. Trading on this counter is thin and as a result huge swings in the share price are to be expected.
Golden Star Resources
The gold miners dropped in January in tandem with the softening of gold Prices in the global market. Signs of economic recovery in the United States and other major economies have slightly reduced the luster of gold as a hedge against inflation. However, most commodities analysts expected prices to remain elevated in the months ahead as inflation takes root in emerging economies and as the developed economies maintain expansionary monetary policies.
The GSE performed strongly as whole: notable climbers included SG-SSB Ltd up 31.03%, CAL Bank up 30% and Ghana Oil up 24%. The decline by AngloGold (which due to its huge capitalization comprises a big component of the GSE All share index) masked what was an outstanding rally in January 2011.
Nairobi, Kenya: NSE
Top gainers
East African Portland Cement +48.75%
Kapchorua Tea +30%
National Bank +17.42%
Top losers
Sameer Africa -16.88%
East African Breweries -8.46%
Mumias Sugar -8.25%
East African Portland Cement
East African Portland Cement (EAPC)’s share price dropped in the last quarter of 2010 after reporting a loss for the year ended June 2010. Sales volumes were up but the company was hit by a foreign exchange loss on its un-hedged Yen denominated loan (The Yen rose strongly in 2009/2010 due to its safe haven status: the Yen was one of the few developed market currencies to rise against the US Dollar in the previous tumultuous three years). The management announced steps to redenominate the loan to USD or have a hedge of some sort. The surge of the company’s share is partially a recovery from the 2010 lows.
Going forward the cement sector should perform strongly. From the beginning of January 2010 to the end of January 2011 Athi River Mining rallied by 70%, Bamburi Cement by 27%. Bamburi has a high dividend yield (about 5% at current prices). The ongoing housing boom in the East African region will benefit all the three companies plus other players such as Tororo Cement who have recently set up shop. The current huge infrastructure projects in Kenya and the expected building up of Southern Sudan after secession should be positive for the cement sector.
East African Breweries
The company’s share price has been hit by announcement of a new law to limit drinking hours in Kenya. The impact of such a law is likely to be limited at least in the long term. Limited drinking hours in the United Kingdom for instance do not appear to have had any impact on the drinking culture in that country. EABL is one of the best run companies in the region, with a strong management and well received brand. EABL is a virtual monopoly in Kenya, has a strong presence in Uganda and makes significant exports to neighboring countries. In late 2010, the company regained entry into the Tanzanian market with a purchase of 51% of Serengeti Breweries. A defensive stock with a decent dividend yield (4.2% at the current price), further drops in the share price should be treated as buying opportunities.
Mumias Sugar
The company’s share price dropped after announcing that that half year profit to December 2010 had declined by 22%: heavy rainfall had hampered sugarcane deliveries. The company’s management expects a much better second half and projects that the full year profits will be higher than for the prior year. Global sugar prices are at a record high. Sugar price hit a 30 year in February on supply concerns after the floods in Australia. The share trades at a PE of just 8.7, making the current price a good entry point. The 4.47% dividend yield is attractive.
Quote
There is nothing wrong with learning from hindsight. : Akan Proverb
