Qatar and UAE are getting close to securing inclusion in the MSCI EM index now that the MSCI has decided to extend its final review to December 2011. The UAE’s new trading system has been positively assessed but MSCI wants to give the system more time to showcase itself before taking a final decision. For Qatar, the main obstacle lies in the foreign ownership limits of up to 25%.
At this junction, MSCI has played the ball into Qatar’s court and is waiting for Qatar to show more goodwill by elevating the rate at which foreign investors can participate in this booming corporate environment.
The EM inclusion will help improve sentiment but Silk Invest thinks that the impact will be limited. More than anything, the Arab markets will mainly be driven by fundamentals and a return to less stormy “political” waters. It is a fact that the Arab markets have already outperformed emerging markets over the past 3 months and we expect this momentum to go on regardless of what MSCI decides.
This year Qatar, already the world’s largest exporter of LNG, will reach its full capacity. Another national trademark; Qatar Airways is likely to IPO later this year, giving investors further ways to capture the growth story in this assertive little big economy. Furthermore, Qtel has plans to further increase their presence the Tunisian mobile phone market.
In Morocco, it is customary to see profit taking ahead of an IPO and this is what we saw prior to the placement of the country’s first new listing, Stroc Industries. It is fair to expect more interesting IPO in the months to come as these market continue on their growth trajectories.
The bulk of Tunisia’s listed companies published their 2010 financials; we are looking at a top line improvement of around 9% when compared to last year. In many cases, these encouraging results are even complemented by generous dividend distributions.
Tunisian exports grew by almost 14% driving the trade deficit down by around 12%. It’s all great news but it seems like we still need to get through the elections before real confidence can return to this North Africa gem.
Ghana’s inflation declined in May to 8.9%, for the third consecutive month. As we mentioned previously, the drop in inflation was brought about by lower food prices. Inflation is even expected to fall further as the harvest season sets in.
Ghana is also set to receive a USD 20million loan facility to be used for facilitating investments and trade flows by both the private and public sectors.
Kenya is going to speed up its equity securities settlement cycle to 3 days from the current 4 days. This will be effective as of July 4 and the improved efficiency is expected to enhance liquidity and make the market more attractive for both local and foreign investors.
The Kenyan shilling has been under pressure. The Central Bank of Kenya (CBK) may be sending mixed signals to the market by mopping up Shillings through repos while lending out more money through the overnight window. The CBK may need to do more than increase interest rates to counter the inflation fears that have driven the Shilling to slide 10% this year. There is also much going on in the telecoms sector. More on this can be read in our detailed updates.
Nigeria is taking action to further strengthen the local food industry. Through and initiative known as the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), the central Bank of Nigeria is to set aside around half a billion US$ to promote agricultural initiatives across the country. The objective of this effort is to drastically reduce government spending that goes to food importation. NIRSAL’ s long term objective is to further stimulate bank lending within the next 10 years as a result of improving the local food industry’s value chain.
South Africa has unveiled plans to tackle its 25% jobless rate by proving tax breaks to manufacturers and set up a job creation fund. There is good news about retail sales, which have unexpectedly accelerated to its fastest pace in almost four years in April, rising by just under 10%.
Egypt‘s General Authority for Supply Commodities has been seen building up wheat supplies after having been inactive for 4 months
The interim government in Egypt has dropped plans to levy a tax on share dividends following strong opposition from investors, and is looking for ways to reduce planned expenditure as a result. A suite of pragmatic alternative fiscal solutions are currently being explored. In any case, the US $1 billion guaranty on of Egyptian Eurobonds is also helping to reduce the country’s borrowing costs.
More good news comes from Saudi Arabia where non-oil exports rose by 24% over the past year and the annual inflation rate fell to a 16-month low of 4.6%. Saudi Arabia will also seek to play a greater role in the International Monetary Fund. In our opinion, this only makes sense when you consider that the Kingdom is one of the planet’s most cash-rich nations.
There are further developments in support of the Central Asian gateway value proposition now that Kazakhstan wants Ukraine to participate in the creation of an international transport corridor from China to Western Europe. In addition, Kazakhstan agreed with China National Petroleum Corp (CNPC) to boost gas transits to China by building a third line to further boost existing capacity.
Kazakhstan also plans to sell 5% to 10% of the shares in major state-owned companies to its citizens through “people’s IPOs” that will start in October. The IPOs will stretch through 2013 followed by international share placement to allow foreigners to further invest in this region.
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