African bourses the answer to local firms’ exposure

much awaited Angolan bourse launch late last year buoyed by an oil rally and some political stabilisation, previously risk-averse investors have recognised the potential.
Angola the big oil fuelled economy has its own stock exchange and has a potential to become the third largest in sub-Saharan African, after the JSE and the Nigerian bourses respectively.

“Angola’s economy continues to recover from the 2009 fiscal and balance of payments crisis,”
The outlook for Angola’s economy is positive amid higher oil prices. China’s relationship with Africa has seen funding balloon to the value of US$115 billion with Angola being one of the beneficiaries.

Expectation has always been high in the Angolan capital of Luanda in which 14 companies initially listed and the bourse registered a market capitalisation of US$36 billion, about three times the size of Kenya’s already established stock market.

Though the Angolan bourse can’t be compared to the JSE, which has a market capitalisation of US$750 billion and 331 listed companies and the Nigerian market which is a close second at US$42 billion.
Angola’s GDP is expected to surge 7,6 percent this year because of oil exports.

Meanwhile, Zimbabwe’s stock market which re-opened trading in February 2009 grew 51 percent in its maiden year of trading US denominated equities some good numbers indeed.
A lot has been said on Zimbabwe’s economic growth, which is being hampered by macroeconomic issues.

The current economic climate has put barriers on foreign investment and ownership rights, with the current Indigenisation policy, which is still being reviewed to accommodate investment.
Any risk-seeking foreign investor sees the under valuation in Zimbabwean firms though they have identified the long-term value. Zimbabwe’s growth outlook has been poised at 7,1 percent but the major drawback is the need to have policies that can support the multi-currency system.

The macro-economic issues are a cause of concern despite the humongous business opportunities and ventures that the country possesses it could really deter investments.
Meanwhile, Nigeria’s bourse was 2009 worst performer having plunged 35 percent the biggest drop among benchmark indices in the 70 largest equity markets.
But since the turn of the year the bourse has bounced back with its banking sector being the driving force with record bank profits which are luring foreign investors, including the big US banks the likes of Citigroup.

With projected growth rate for this year projected at 3,8 percent against the World Bank’s global forecasts of 2,3 percent.
Such growth rates have been given the nod by investors seeing Nigeria as an attractive emerging market.

Government intervention in its banking sector has restored confidence and analysts say the sector has good valuations
Another stock market set to rally is Ghana’s bourse Africa’s newest oil exporter.

According to market analysts oil in Ghana will be far better managed than in Nigeria.
Production is already underway prompting another stock market rally. Its benchmark index fell over 50 percent in 2009 making it another of Africa’s worst performer after gaining 50 percent in 2008, but the exchange has regained momentum this year.

The biggest concern for a number of countries is that economic growth is heavily reliant on oil.
These countries need to see the importance of diversification probably invest also in agriculture and start an extensive infrastructure investment drive using the revenue obtained from oil exports like what happened in Dubai.

Oil accounts for 90 percent of Nigerian exports. However, stock markets make access to companies in other sectors of the economy like financial services, telecoms and retail easier.
The story goes on over the reliance of a number of countries on one commodity and its not just oil.

The drop in the prices of diamonds and copper respectively in 2008 have affected our closest neighbours Botswana and Zambia after the financial crisis.
A fall in diamond prices saw Botswana’s economy slowing down in almost every sector of the economy.

The Botswana government has since halted several developmental projects due to a lack of funding.
This has also seen DeBeers the diamond mining giant shelving some of its projects like the creation of 3 000 jobs in the opening of its new plant on the wake of its new diamond discovery all because of the recent slump in prices of the commodity.

With the ongoing debt turmoil’s in the US and Europe commodity prices have since rallied as investors’ flight to safety increased.
Copper prices have been trading at breaking levels as Zambia has increasingly lured companies like Vale and Vedanta to a US$6 billion investment on its copper fields.
Zambia eased restrictions on foreign investments and ownership rights as part of their investment drive.

Their growth outlook in Zambia looks positive with no drawbacks and is poised to by expand 6,8 percent according to the IMF.
With a severe drought likely on the global scene, Kenya’s vital agriculture sector will sure benefit from the global demand, as soft commodity prices like wheat and soyabeans rallied.

The situation on the world markets makes dealers increase bets on soft commodities that is take a more bullish position on food commodities.
More African bourses are good for the growth of the continent’s private sector leading to investment, better liquidity and could enhance a company’s ability to operate in locations outside its domestic market.