2020 will probably have a few dedicated chapters in history books due to the unprecedented situations we had to go through in so many areas of our lives, and this, at a global scale. But the performance of African equity markets during the final trading week of the year reflects investors’ optimism for a return to normalcy as vaccination campaigns are unfolding across the globe, and governments confirmed their intention to support economies.
African equities were mostly up the last week of 2020, with Zimbabwe and Nigeria confirming their spots as the continent’s top performers. Their benchmark indices jumped by 17.51% and 3.79% respectively during this 4-day trading week, capping an impressive year for both markets despite the challenging global environment. Markets in Uganda (+3.65%), Ivory Coast (+3.22%), and Malawi (+2.47%) complete the top 5.
Overall, for the year, most markets did not manage to fully recover from the global sell-off in March, with the notable exception of the ZSE and the NGSE. Of course, at the individual stock level, some industries such as telecom outperformed, but we will keep a high-level market view for now.
With a whopping 1,045% jump in its All Share Index, ZSE has experienced its biggest annual advance in a decade after a tumultuous year, with gains aided by the local dollar’s decline, high inflation levels, and undervalued stocks. End of June, authorities even ordered the suspension of trading for more than a month from June 26 to August 3 amid allegations some market players were fuelling foreign currency instability through the use of dual listed Old Mutual. The counter was used to calculate the Old Mutual Implied Rate (OMIR). The OMIR was used by illegal foreign market dealers to determine the exchange rate between the Zimbabwe dollar and the US dollar. While the official exchange rate was pegged at 25, the OMIR and the parallel market exchange rate had raced to 120. This pushed inflation to a record 837%. After an initial sell-off at the reopening, stocks soared to end the year up 135% overall in US dollars terms when using the official exchange rate (81.79 ZWL/USD). Top performers include the financial services group CBZ (+12,093.4%), which overtook the beverage company Delta Corporation as the most valued company on the ZSE, Masimba Holdings (+6,533.2%), Cafca (+4,950.0%), Hippo Valley Estates (+4,524.2%), and ART Corporation (+3,291.6%).
Nigeria, Africa’s largest economy, saw its market’s benchmark index jump by 50% in 2020 in local terms and 40.65% in US dollar terms, enough for various analysts and media outlets to grant the NGSE the title of world’s best performing (what we think is unfair to the ZSE). Investor appetite for riskier assets during the year was mainly due to the ultra-low yields prevailing on Nigerian short-term fixed-income instruments, with rates on treasury bills across all tenors dropping below 1%, the lowest level seen since 2001. The trend of declining yields has been around for a while, following the Central Bank of Nigeria’s decision to ban locals from participating in the large-sized OMO market in October 2019, leaving limited investment outlets for local investors with low-risk appetite and large pockets. Blue-chip stocks such as Dangote Cement, MTN Nigeria, Airtel, and BUA Cement directly benefited from the rush for return: DANGCEM, the market leader by market capitalization, rose by 72.5%, the leading telecom operators, MTN and Airtel gained 61% and 185.0% respectively, and BUACEMENT jumped by 121% since its listing in January 2020.
One year ago, as we usually do at the beginning of the year, we extended wishes for prosperity, health, and success, sometimes without really appreciating the meaning of that custom. But today, after the year we have had, it becomes obvious that we cannot take those wishes for granted. So, we sincerely wish you the very best for this new year which, we know, will have its lot of challenges on several fronts. But we hope you will manage them and prosper in 2021...we mean it.
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