Johannesburg – African stocks are losing more money for investors than their frontier-market peers, as Kenyan and Nigerian equities languish in bear markets on concern slower economic growth will dent corporate earnings.
The sub-Saharan nations led declines over the past week among 25 countries on the MSCI Frontier Markets Index, which fell 4.2 percent through Wednesday amid a rout in global assets spurred by evidence that growth in China’s economy is slowing. Kenyan equities, including Vodafone’s Nairobi-based unit Safaricom and Diageo’s East African Breweries, dropped an average 7.8 percent, while securities traded in Lagos, such as PZ Cussons Nigeria and Union Bank Nigeria, slid 6.6 percent.
Nigeria, Africa’s largest economy and oil producer, is struggling to cope with oil prices near six-year lows, while a delay by President Muhammadu Buhari in naming his cabinet since taking power in May is deterring investors seeking direction on economic policy. In Kenya, growth is slowing as the country’s $1 billion-a-year tourism industry contracts following a spate of attacks by Islamist militants and a drought cuts tea crops, hurting the East African nation’s largest sources of foreign exchange.
“When you look at African countries and their economies this year, they’re under a lot of pressure because of very low commodity prices,” Isaac Matshego, an economist at Nedbank Group in Johannesburg, said by phone on Thursday. “It’s expected generally that economic growth is going to be weak and in a weak growth environment you’ll have corporate growth earnings under pressure too.”
The MSCI EFM Africa ex-South Africa Index dropped 8.7 percent this month through Thursday, compared with a 7 percent decrease in the MSCI Frontier Markets Index. Stocks in Egypt have been the biggest losers, followed by Kenya, Mauritius, Morocco and Nigeria. Egypt’s EGX 30 Index is down 21 percent this year, the fourth-biggest decrease globally, as oil tumbled below $40 a barrel.
On a monthly basis, the MSCI Frontier Market index is trading at its highest price relative to the African measure in almost eight years. Vietnamese stocks are leading gains this week, with PetroVietnam Drilling and Well Services JSC, the country’s biggest listed oilfield services provider, climbing 7 percent and Bank for Investment and Development of Vietnam jumping 6.6 percent. Argentina’s Grupo Financiero Galicia SA advanced 5.8 percent.
Kenyan equities have slid for 12 straight days for their longest streak of losses since December 2013, while Nigerian shares are down 21 percent since their April 2 peak, meeting the common definition of a bear market.-Iol