Nigeria
The Nigerian elections were postponed form April 2 to April 9 due to logistical issues with ballots. The market remained fiarly calm about this. The main take-away is that authorities are handling this delay with greater transparency and that all parties unanimously agreed to the postponement. The Nigerian electoral process is far from perfect but we are seeing great improvements on the past three elections. There is reason to believe that there is much progress towards a functional democracy in Africa’s most populous nation.
Saudi Arabia/Bahrain
The protesting in Bahrain and Saudi seems to be waning, this may partly have to do with the fact high seasonal temperatures makes protesting rather uncomfortable. Regardless of the fact that this may be a factor, in the end, the Saudi and Bahraini stock markets didn’t seem affected by these events, especially when you consider that the Saudi index posted a +10.46% return over the month, despite the concerns over unrest. Bahrain closed the month almost flat at -0.43%.
Egypt
It was interesting to observe that the Egyptian market re-opened from its extended close with surprisingly high levels of liquidity and good support by foreigners and locals. March also saw a new constitution and a fresh interim cabinet. This new political team will run the country until the elections in September. So far, this transition has been evolving very positively and the pace of change is amazingly rapid. It is clear that this revolution was all about jobs and wages and that the social aspect can’t ever be underestimated. Going forward, those who run the country will have to live up to high expectations. In the medium term, look out for a national program to stimulate the economy. Quick fix projects directed towards housing and SME’s will probably come first. The government hopes to fund it with FDI and they have been on the road to promote the ‘New Egypt’. Another key objective is to revive the tourism sector.
There has been much talk about devaluation of the EGP. A warning signal for such a move could be Egypt stocking up on large quantities of wheat to ensure adequate food supply. Also worth noting is that the country’s Net International Reserves (NIR) have held up better than expected. A good way to look at this is that currently NIR allows to cover 7.4months of merchandise imports vs. 8.8 months at the end of 2010, all in all this is around a 16% decline which is not too bad for a nation that is coming out of a ‘revolution’.
Furthermore, in the event we would have a devaluation Egypt, we believe it will most probably not provoke a competitive devaluation war in the Maghreb region, but will rather push Morocco and Tunisia to fast forward political and social reforms to reassure foreign investors.
Comments on this entry are closed.