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Friday, May 15, 2020 / 3:54 PM / United Capital Research / Header Image Credit: GPPi
Stock markets around the
world defied expectations in the month of April-2020. In Sub-Saharan Africa
(SSA), despite the economic lockdown, surge in number of COVID-19 cases, low
commodity prices and the high level of uncertainties, Investors took advantage
of the cheap valuation to average down portfolio costs during the month.
Notably, equities markets in Nigeria (+8.1%m/m), South Africa (+13.1% m/m) and
Kenya (+5.9% m/m) chalked m/m gains, while the Ghanaian Stock Exchange (-2.7%)
mildly ended the month in the red territory.
In Nigeria, attractive
dividend yield, improved outlook on crude oil prices following OPEC+ deal, and
the low interest rate on Treasury bills, fuelled renewed interest in the stock
market. Also, investors bought the March-2020 dip in South Africa and Kenya,
with valuations supported by the weaker currencies that characterized the month
in both countries - South Africa's rand (-3.7% m/m) and Kenya' shillings (-2.1%
m/m). Meanwhile, investors adopted a risk-off approach in Ghana, maintaining
preference for the high yielding government and the Bank of Ghana' backed fixed
income securities.
Looking ahead, we believe
the gradual easing of lockdown across different the region, the
disbursement/approval of IMF loans, as well as decrease in level of risk
aversion should boost investors' appetite for equity market investment.
However, we expect the recent suspension of the final dividend payment for
FY-2019 by Scancom Plc. (MTN Ghana) until further notice to further dampen
sentiments on the Ghanaian Stock Exchange in May-2020.
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