Market Review
In Egypt, the bullish trend saw a revival and the EGX30 index closed December up 9.7%. It is striking that the market remained resilient at a time when the security situation deteriorated with terror attacks in the country making the headlines and increased protests by Muslim Brotherhood linked students. The Central Bank cutting the interest rates by 50 bps is in line with our view that the latter is looking to lever the impact of GCC aid on the local economy. Over the year, the Egyptian market is up 24% despite all the turbulence experienced by the country. The Nigerian All Share Index closed the month up 6.2% and booked a whopping 47.2% this year. While the yearly performance is impressive, the configuration of that index is slightly peculiar: the weight of Dangote Cement is over 30% of the index while the company only has a 5% free float. Demand for the stock is strong and supply is thin leading to an impressive 71% performance this year and contributing nearly half of the yearly Nigerian market performance. The Kenyan market lost 3.2% in December but the momentum turned positive again towards month-end. The country probably benefited from the shy Fed tapering. Over the year the market gained 44% mainly driven by the telcos operator Safaricom (+115%) and blue chip banks.
The South African All Share index gained 2.8% this month and closed the year up 17.8%. Note that the USD performance of the market is much less impressive as the Rand was one of the weakest currencies in the emerging market space and lost 19.4% versus the USD this year. Contrary to other EM Central Banks, the SARB did not raise interest rates last year to defend the currency.
The configuration in Ghana is similar with the Cedi losing 19.3% versus the USD this year due to lax macro-economic management while the equity market gained an impressive 78% mainly driven by banks and consumers in an however extremely illiquid market. Morocco and Tunisia significantly underperformed the other market this year with negative performances of 2.6% and 4.3% respectively. In Morocco substantially lower earnings growth and high valuations are the culprits while Tunisia is still grappling with its revolution.
The Fund significantly outperformed its reference benchmark this year as our Egypt views paid off during the second year half. January will be a critical month for Egypt given the upcoming constitution referendum and revolution anniversary. In Sub-Sahara Africa we continue monitoring flows to adjust our strategy accordingly. We expect the orientation of the USD to play a significant role in our markets during the upcoming period.
