Market Commentary

Going into the last week of November, African markets mostly closed negatively. With only 5 out of the markets under coverage reaching positive territories.

Fitch rating agency kept its rating for South African foreign currency and local currency unchanged at the lowest investment grade level on Friday. However, the agency changed its assessment over the outlook to negative from stable based on the continued political instability that the country is facing. Over the last months, political turmoil in the country has weighed on investors' sentiment and increased concerns over the country's ability to make required reforms to turn the economy around. S&P Global Rating is expected to announce its outlook on 2nd December and consequences could be harsh for the country such as increased borrowing costs and making it tougher for the government to meet its debt obligations, obtain credit and meet fiscal targets. Fitch forecasts a GDP growth of 0.5% this year, 1.3% next year and 2.1% in 2018. The JSE ASI closed almost flat at 0.14%.

It may seems as if this edition is focused on Nigeria, and you are right, a lot of movement on the Nigerian stock market took place this week.

The United States elected their new President this week, globally markets reacted pretty well or not as bad as they were expected. What about African markets? During his campaign, Trump has been highly vocal about his willingness to file trade cases against China. Should this materialise, further contraction of the Chinese economy would be negative for African economies that are dependent on export to China. However, given the size of the US debt that China holds (~$1.3T), and potential retaliation, it seems difficult to enforce and not necessarily a sensible step to take.