Over 2018, key equity markets in Sub-Saharan Africa (SSA) ended the year in red territory as Foreign Portfolio Investors (FPIs) exited the market following rising rates in developed markets, amid growing uncertainties in the region.
Election-related concerns spooked FPIs in Nigeria, while underwhelming economic growth weighed on South Africa’s market performance.
Thus, major benchmark indices in the region ended 2018 broadly negative.
Looking ahead, we believe SSA equities are relatively cheap from a valuation standpoint, with a much lower price multiple after being badly beaten following FPIs exit.
Looking ahead, we believe SSA equities are relatively cheap from a valuation standpoint, with a much lower price multiple after being badly beaten following FPIs exit.
However, downside risks remain elevated as potential headwinds from changing financial conditions in the global space to higher US Treasury yields, remain a threat to fund flow.
Overall, we expect the equity market to improve relative to 2018 as SSA macro conditions continue on the path of recovery.
Overall, we expect the equity market to improve relative to 2018 as SSA macro conditions continue on the path of recovery.
If the recent trend is anything to go by, Ghanaian and Kenyan markets remain our top picks with an expectation to outperform peers, especially given their relatively stable economic and political environment.
We are also more positive on the South African market than Nigeria’s, considering that the upcoming South African election is expected to be less contentious (ANC is expected to win).
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