The gold mines and gold price continued their upward trend and posted significant gains. Some of the political risks that strongly supported the gold price in the previous quarter included the discussion of a potential impeachment of President Trump in the US and complicated Brexit negotiations between the EU and the UK. Following a strong run in 2019, we remain confident that gold mines will continue to perform well in 2020. On the one hand, the US presidential election in November 2020 represents a notable political risk. The incumbent President Trump will certainly try to reaffirm his reputation as a strong leader, whether in trade conflicts or confrontations with other countries such as Iran. On the other hand, a further increase in the base rate in the US or Europe is not expected. The relationship between the gold mines and gold price is still at a moderate level. Based on this situation, the gold mines may continue their upward trend if the gold price remains at the same level.
The Nigerian stock market continued its poor performance in 2019 by ending the quarter in negative territory. The development of the Nigerian stock market over the past three years, in particular financial assets, could best be described as a "value trap". In spite of good figures and healthy balance sheets, international investors steered clear of favourably priced West African stocks. One of the reasons is a general concern about the large numbers of non-performing loans in the financial sector due to fluctuations in the oil price. Otherwise, the riskier stocks are considered a less attractive investment proposition because of the high yield of Nigerian local government bonds (around 14%).
In Kenya, there was a little excitement in the previous quarter. Conversely, the South African stock market fell sharply. Rich in natural resources, the country’s stock market was not able to take advantage of the positive news that the economy avoided a technical recession in the second quarter of 2019. One of the main reasons for this weak performance was the high volatility of raw material prices.
The raw material market experienced major fluctuations in the last quarter. The unwanted side effects of the ongoing trade disputes between the US and China together with fears of a global economic recession have unsettled investors around the world, putting raw material prices under considerable pressure.