African markets will benefit from millions of visitors heading to the 2010 FIFA World Cup in South Africa, which starts June 11. Tourism, transportation, food services and banking are among the sectors likely to post gains.
The region’s markets were undermined by the effects of a mid-April ban on air travel to Europe stemming from Iceland’s volcanic ash cloud and by the euro’s sharp decline in early May due to debt crises in Greece, Portugal and Spain.
Foreigners have stepped up buying of South African equities so far this year, with net foreign buying for March valued at more than $2.5 billion, a third of last year’s total. Total volume rose 8 percent while equities value surged 6 percent. However, traded value for the country’s main index took a hit in April, falling 10 percent, its sharpest decline in more than a year, and may decline further in the near-term as a scheduled strike by logistics workers threatens to cripple rail, pipeline and port operations in Africa’s biggest economy.
In Kenya, Nairobi’s main index rose in late April and early May after flights resumed shipping horticultural products to Europe. Kenya’s flower sector lost more than $10 million as inventories perished after the ash cloud rendered much of Europe a no-fly zone for a week. However, the Kenyan economy has recovered, with banking shares rising in early May to its highest level since July 2008. Still, the local currency remains under pressure.
Elsewhere, Nigeria’s shares rose, but equities in Mauritius, Ghana, Namibia and Egypt all fell in April and early May. The average yield on Egyptian 91-day Treasury bills rose nearly 10 percent in the first week of May amid concerns about downside risks. On the bright side, Egypt plans to introduce a trading system enabling foreign investors to place buy or sell orders for shares on the Cairo exchange more directly, improving liquidity and efficiency. Investors abroad will still need to operate through a licensed broker in Egypt, but the new system will automate the process, meaning the Egyptian broker will not see details, such as the size of the order, until the transaction is completed.
The Caribbean bourses did much better in April than their African counterparts and could post more gains in the summer if more tourists head to the region. The Jamaican index jumped 10 percent while Barbados rose 2 percent, as the region made a faster-than-forecast recovery from the global financial crisis. The International Monetary Fund is now worried about a bubble forming in some economies in the region. Trinidad and Tobago was the worst performer, edging up 1 percent.