Thursday, December 9, 2010

Market Intelligence - Equities

During the week of 29 November – 3 December 2010, the majority of African stock markets rebounded alongside the major global stock markets. The latter rallied due to waning concerns about Europe's sovereign debt crisis and improving economic data that signalled that the U.S. economic recovery was on track. Expectations for a resolution to Europe's debt crisis were strengthened on the observation that the ECB had been purchasing Portuguese and Irish bonds and expressed its willingness to keep its benchmark interest rate at 1%, a record low. The ECB also extended an emergency loan program, and a U.S. official announced that the country would be ready to back a larger European financial stability fund via increased commitments to the International Monetary Fund. Moreover, economic data on stronger-than-expected November same-store sales from U.S. retailers, a sharp jump in pending home sales, larger payrolls in the U.S.A., and increases in European retail sales helped to support the positive market sentiment.

Six out of the ten monitored African stock markets recorded gains over the week. The largest gain of 2.4% was observed for the stock market in Morocco, followed by moderate gains of between 0.6 – 0.8% by the markets in Mauritius, Côte d’Ivoire, Nigeria, Ghana, and South Africa. On the other hand, substantial losses of between 1.5 – 2.2 % were posted for the stock markets in Egypt, Kenya, and Uganda, while a moderate loss of 0.6% was reported for Tunisia.

Equity Focus

Kenya: The Nairobi Stock Exchange Index continued its decline since the last week of October, recording a loss of 1.9% over the week. An analyst at one investment bank argued that the decreasing trend was seasonal and similar to developments observed during the pre-Christmas period in previous years.

Nigeria: The NGSE All Share Index rebounded by 0.8% over the week in line with global markets. The Nigeria Stock Exchange, the third largest in Africa, announced it would extend its trading day by two hours in a bid to attract more foreign investors, especially those from the U.S.A., to boost market liquidity. The trading hours would be extended to 9:30 am - 2:30 pm local time (08:30-13:30 GMT) from December 6. It had previously closed each day at 12:30 pm. Weak regulation and low market liquidity, making it difficult for investors to exit their positions, have so far hindered the development of the stock market in Nigeria.

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