he biggest winners in the last quarter were undoubtedly the gold mines, whose value has risen considerably. Concerns about the harmful effects of the coronavirus and fears of a second wave of infection in the western world led to a rise in the price of gold. We firmly believe that both the price of gold and the prices of gold mines will continue to rise due to the ultra-loose monetary policy of central banks and the ongoing political risks.
The Nigerian stock market was able to recover some of the massive losses in the first quarter. The main reason for this was the recovery of the oil price, which doubled from its low in spring 2020. As low oil prices pose a real threat to the country, both economically and socially, it could prove a blessing if the government of the West African country were to succeed in implementing some comprehensive reforms. The most important of these would be the abolition of fuel subsidies. Several governments have already attempted to do this over the last two decades, but this has repeatedly led to fierce protests and social unrest.
The South African capital market also appreciated significantly, driven by the recovery of commodity stocks, especially gold mines. The rally in technology stocks, which account for around one-fifth of the market capitalisation of the entire market, gave an additional major boost. Nevertheless, the local economy will suffer particularly this year from the expected contraction in the wake of the coronavirus crisis.
The Kenyan stock market made comparatively small gains in the previous quarter. The Kenyan economy suffered a drastic negative shock from the corona pandemic. Faced with many problems, such as lower exports of flowers and tea and fewer remittances from Kenyans working abroad, the East African country is having to take on more debt to offset its higher than expected budget deficit.
Outlook
We believe that the fundamentally good prospects for African investments remain intact after the crisis. The recent correction in African stock markets in 2020 as a result of the Covid 19 pandemic represents an opportunity for long-term oriented, international investors to enter the market. The widespread use of the internet will enable a digital transformation of the continent. The considerable potential of the black continent due to the high growth rates and the constantly growing young population will certainly continue to be positively noted by international investors.
Ahmed Helmy, Dr. Kohlhase Vermögensverwaltungsges. mbH