Weekly Market Commentary - February 19, 2016

Stocks climbed on most markets this week as hopes of major oil producers freezing their output level induced a rebound in oil prices. Hopes were rapidly tempered and oil price gains given up at the end of the week after a Saudi Official declared the country was not prepared to cut production. The end of the week saw a slight sell-off following the big run as some profit-taking took place which is understandable given the uncertainty within current market conditions.
 
As far as African markets are concerned, the performance was mixed with 8 out 15 markets under watch closing the week in the red zone. The worst performance was witnessed on the ZSE Ind. which further declined by 1.90% over the week as the economic environment is still strongly affected by the severe drought affecting the region. The USE ASI declined by 1.19% this week. Uganda’s Central Bank left its benchmark lending rate at 17% this week saying there were significant risks such as more weakening of the currency and bad weather that curbed food production to the outlook for inflation. The bank's policymakers began raising rates last year after the UGX weakened, threatening to drive up inflation. The UGX is down nearly 1% against the USD this year after weakening by close to a quarter in FY15. Also showing a weak performance this week, the NGSE ASI dropped 1.04%. Naira considerably plunged at the parallel market on Thursday, hitting 391 against the dollar as foreign exchange scarcity continues to hit the country.

EGX 30 logged gains for the week as it rose by 2.25% contrasting with the ~6% decline from last week. The index performance was driven by leading companies’ solid statements and dividends and most importantly by the somewhat stability of oil prices and global stock markets. The JSE ASI rose by 0.72% also displaying contrasting profile versus last week. Various elements contributed to that performance. Among other things, the rand climbed to its highest level since late December during Thursday trade as dwindling fears of a global economic downturn boosted risk appetite. Mostly, investors are waiting for Pravin Gordhan’s key budget speech next week to rest assure about a prudent fiscal policy. Announcement by Anglo American of its intention to consider the selling off its assets in the Kumba Iron Ore Mine also supported the index performance as the news was positively received by investors. This helped offset the profit warning issued by MTN which saw the stock tumble more than 13%.

Finally the NSE ASI reached the green territory climbing 0.14% compared to its 0.63% loss last week. Moody’s announced it has maintained a stable outlook on Kenya, citing buoyant infrastructure-driven growth and declining fiscal and current account deficits. The Kenyan shillings has made slight gains against the dollar in the last two months lifted by export earnings, notably from tea and horticulture and good dollar inflows for non-governmental organisations. In parallel, it seems the market has recorded limited demand for the dollar.