Riding an Upturn
Major stock indices in Africa and the Caribbean are riding an upturn in corporate earnings and on expectations for higher economic growth to regain the investment capital ceded to the bond market in last year’s recession.
Brokers are now using forecasts showing a steady rise in the rates of return from equities to urge investors to get on board. Their efforts have been made easier by falling returns from government bonds and a surge in equities.
Major listings on Kenya’s Nairobi Stock Exchange have seen increased demand for shares, with trade volume sharply higher and the traded value also posting a 4 percent gain in the first half of June. The government’s plans to sell its shares in key firms could attract interest from domestic and foreign investors. In South Africa, the June 22 victory over France in the 2010 FIFA World Cup in Bloemfontein provides a perfect metaphor for the euphoria in Africa’s richest nation, where tourism, property and construction sectors are
booming, largely due to the fact that it’s hosting the world’s biggest sporting event.
The Johannesburg Stock Exchange has seen a sharp increase in activity, with derivatives increasingly attracting a sizable share of investment. The latest JSE monthly trading data show equity index rising 4 percent in mid-June and up by 24 percent from a year-ago levels. In Egypt, the upswing in share prices continued in mid-June as bargain hunters took advantage of recent declines to pick up positions in blue chip stocks in anticipation of full recovery. Cairo’s major index jumped 4 percent mid-June after a 3 percent decline in May.
In the Caribbean, Jamaica’s main index was up nearly 10 percent in mid-June, having gained 24 percent for the past year. Recent skirmishes in Kingston have failed to knock the wind out of the island’s sails, though the market is a little volatile. While the Jamaican economy has lagged, its largest bank, Scotia Group, continues to grow and is a good buy. Investors are voting with their wallets, with Jamaica Teas Ltd.’s IPO oversubscribed and telecom giant Digicel seeing a 15 percent growth in subscribers. Gains in Trinidad and Tobago were modest in mid June, while the Barbadian market was less active.