Harare – An analysis of South and Central Africa’s stock markets by AfricanFinancials shows that bourse and currency performances are increasingly influencing investor attitides.
AfricanFinancials’ South Central Africa Top 30 Equities Valuation Report shows thatbourses in the two regions are the smallest in Sub-Saharan Africa (excluding South Africa), with the largest company ranking 32nd on the continent. Big Cap stocks in South Central Africa are far less profitable compared to West and East Africa.
“Of the five countries covered in the report, only the Zimbabwean stock market had a positive US$ return year-to-date of 50.1percent. Mid-cap stocks are marginally more profitable than big cap stocks with ROE’s of 25.8 percent vs 23.3 percent.
“Of the top 30 stocks Botswana has 10, Zimbabwe eight, Malawi six, Namibia four and Zambia two. Banks account for 14 stocks, food and beverage six, telecoms four, agriculture one and others five,” states the report.
It says South Central African currency weaknesses are ongoing and chronic and are deterring investors.
Botswana’s currency is linked with the South African Rand and IMF Special Drawing Rights; Namibia’s currency is also linked to the rand. The rand’s depreciation has been increasing. Malawi is a small economy but with a successful stock market. However the Malawian kwacha has lost 75 percent of its value in recent years.
“Our observations regarding outliers in the banking sector is that; Zimbabwean banks are difficult to value on account of high inflation. FDH Bank in Malawi has a high ROE primarily on account of its high non-interest income. Letshego Holdings, with a 15percent ROE, is at a big discount to its regional peers.
“With regards to commercial companies, Zimbabwean companies are difficult to value on account of the sustained inflation Brewers have been hit by COVID- 19 restrictions and lockdowns. Sefalana (retailing) appears undervalued and Press Corp (Malawi) looks to have a big conglomerate discount and, further, has low profitability.
“South Central Africa is an oil importer. Thus falling oil prices in 2020 resulted in improved terms of trade. This is now moderating. In terms of the oil; and mining sector, Zambia is a major copper producer together with Katanga province of the DRC. Copper mining is a capital intensive industry and is an important contributor to government revenue.
“However, the rising copper price has come too late to rescue Zambia from its sovereign debt crisis. Zimbabwe is a gold producer and much is artisanal. The rising gold price from 2018 will have benefitted Zimbabwe. The fall in 2021 is modest at 11percent,” says the report.