Another eventful month for our markets has come to an end. Both the MENA and African markets turned out to be a patchwork of dynamics and performance. There were spectacular rises in South Africa and Egypt with 10.12% and 8.25% respectively for the month! Nigeria and Ghana continue to struggle, the first mainly due to concerns in its banking sector, the latter because of ongoing market liquidity issues. With regards to Nigeria, many of the unknowns with regards to the transparency of the financial system and its bad consumer loans are probably priced in right now. The Naira (Nigerian Currency) dropped by more than 17% YTD vs. the Euro with almost -7% of this decline recorded in July. If you consider that this happened despite a rise in oil prices; to which this currency is usually very much correlated, we would argue that the investment case for Nigeria is becoming very interesting, especially for the Euro investor! It is clearly the banking sector that has been weighing down on the Nigerian market as we generally observed solid earnings reported in other industries.
While it is difficult to generalize, the main theme for the Middle East was that reported earnings came out much better than the market’s pessimistic expectations. Again, much focus was on the banking sector. Speculations around the size of the Saad Group and Al Gosaibi loans-gone-bad continue to haunt the markets and the fact that financial institutions have been raising provisions is keeping investors alert. What caught our attention was the composition of Emaar’s results as it Q2 loss mainly came from writing down its main investment in US. Excluding this write-off, Emaar apparently would have reported positive results derived from its local business and the projects in Pakistan and Turkey.The Magreb markets seem to have taken a bit of a holiday as the trading volumes are at historical minimums. There has been some profit taking in Tunisia. The market may be getting ready for new supply from the announced IPOs. Morocco’s institutions are quiet these days. Maroc Telecom Group succeeded in achieving further growth in revenues and satisfactory financial results. These were sustained by its African subsidiaries’ performances as the company presses ahead with its expansion into sub-Saharan Africa and will be looking for further acquisitions in the coming years knowing that it holds no long term debt.
Finally, it is good to see that there are people in Abu Dhabi who are beginning to dream again! Branson’s commercial space venture, Virgin Galactic Ltd has raised funding from a Abu Dhabi investor in exchange for a 32% equity stake in the venture. Stay tuned for further news about an Abu Dhabi space port!
Kind regards
Baldwin
Our fact sheets and more detailed reports on what happened during July can be found in the attached monthly reports or by clicking on the links below for those who read this on the Silk Invest Updates Blog page.
You may also want to have a look at our recently published white paper in which Silk Invest’s Daniel Broby (CIO) and John Bates (Head of Fixed) income make the case for Frontier Market Debt by applying ‘Reverse Asset Allocation’. It’s a thought provoking piece which suggests a method for investors to incorporate this asset class in their portfolios: Reverse Asset Allocation and the case for frontier market fixed income
Access the monthly reports on our website
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