Nairobi – East African capital markets were the best performers in sub-Sahara African during 2014, topped by the Tanzanian bourse that grew by 22.7 per cent, followed by Uganda at 14.1 per cent and Kenya, 13.3 per cent, a report by fund manager PineBridge indicates.
The sub-Saharan Africa market performance report, however, shows sub-Saharan Africa equity market performance was mixed, with Rwanda Securities Exchange declining by 4.5 per cent over the reporting period.
The worst performers in local currency terms were Zimbabwe where the market lost 19.5 per cent and Nigeria which lost 16.1 per cent of its value in the year.
In dollar terms, however, most markets had negative returns. Performers with positive returns were only Kenya, Uganda, Tanzania and Malawi. The worst performers were Ghana, Nigeria and Zimbabwe. Ghana lost 31.9 per cent while Nigeria and Zimbabwe lost 27.9 and 19.5 per cent respectively in the year.
“The Nigerian market dropped by 27.9 per cent on fears of currency devaluation amid falling oil prices,” said PineBridge Investments.
The poor returns in most countries in the sub-Saharan region had to do with the weakening of African currencies against the US dollar. The greenback has strengthened in the past year, pressuring down other currencies.
PineBridge Investment chief executive Jonathan Stichbury said Kenya’s fixed-income market, including Treasury bill and bonds, would remain attractive because returns were higher than in advanced markets.
“Returns on bonds are higher in Kenya and therefore foreign investors will remain interested. In Kenya you can get a 10 per cent coupon rate, but in places such as the US you get only two per cent,” said Stichbury.
The investment firm said the markets would also be positively impacted by higher growth rates in terms of the gross domestic product (GDP).
PineBridge chief investment officer Nicholas Malaki said GDP growth would likely be 6.2 per cent this year, while it would be 7 per cent in Tanzania and 6.3 per cent in Uganda.
“We expect equity markets in the region to be broadly supported. Strong growth, pro-business policies and benign macro-environment – supported by lower oil prices – should have positive impact on both consumer and business spending,” said the investment firm in a report on the regional markets.
The report added higher economic growth would result in higher corporate earnings that would in turn positively impact stock prices.
Malaki said the trend in Kenya would be equities market to continue growing as the country is viewed as a favourable investment destination by foreign investors.