With an increase of 12.57% (in EUR) in the first quarter of 2019, the development of the African equities market was very encouraging. The global recovery of the financial markets had a positive effect on African stock markets.
Global capital markets welcomed announcements issued by the US Federal Reserve (FED) and the European Central Bank (ECB) that they anticipate a lengthy pause in interest rate hikes. Hopes of a resolution to trade disputes between the U.S. and China also contributed to a favourable outlook. These positive developments were reflected in higher oil and commodity prices.
The Nigerian stock market trended sideways in the first quarter of the year. There were no surprises in the West African country's presidential elections when controversial incumbent Muhammadu Buhari won the elections and assumed his second term. This final result did not impress international investors who were counting on a change of course. We remain convinced that Nigerian equities hold promise for the medium and long term. Most notably, the prices of Nigerian financial stocks will have a lot of upward momentum in the coming years due to their favourable valuation.
In Kenya, the domestic stock market experienced an upward trend. Of particular note was the positive growth of the Kenyan banks after the high court of the East African country declared unconstitutional the law that has imposed a limit on loan interest rates for the past three years. This decision should have a positive impact on lending and on banks' profits. Following the trend of the global stock markets, the South African stock exchange recorded strong gains. Additionally, South Africa survived a review from Moody's and maintained its investment-grade rating.
Gold mines continued their upward trend in 2019, finishing the first quarter in fine form. The loose monetary policy of the major global central banks and concerns about weak global economic growth supported the price of gold and gold mines. We do not expect the Federal Reserve (FED) to raise interest rates until the end of the presidential elections in 2020 due to political pressure from the incumbent President Trump.
Outlook
Good prospects for African investments remain undiminished. Progress in democratic development, economic reforms and recovering oil and commodity prices provide a good basis for positive growth. At the same time, the widespread use of the Internet will enable a digital transformation of the continent. International investors will certainly give consideration to the high economic growth rates and the young, growing population of the “Dark Continent”.