Prospects on the Nairobi Stock Exchange are improving

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Last week, Kenya’s Supreme Court confirmed the election of William Ruto as the country’s new president. He was inaugurated shortly thereafter. This year’s tough presidential campaign had depressed sentiment among market participants. But now that the race between Ruto and his opponent Raila Odinga is decided, we expect investors to look forward and, hence, the exchange in Nairobi to catch up with Africa’s other markets.

During the campaign, Ruto presented an economic programme that included a promise to increase the daily income of ten million struggling Kenyans by KES 200 (EUR 1.66). If Ruto makes good on his promise, this could help to promote social cohesion in Kenya.

However, investors will mostly be focussed on the infrastructure investments he is planning. For example, Ruto aims to invest heavily in the information and communications technology (ICT) sector. Specifically, he wants to add 100,000 km of fibre optic cables to the existing network. This should greatly improve the country’s access to broadband internet.

These investments are undoubtedly necessary. But the new president did not reveal how they will be financed. As reported, Kenya’s debt-to-GDP ratio has increased to 70.3% currently from 44.5% in 2013 under Ruto’s predecessor Uhuru Kenyatta

Regarding Kenyan stocks: The blue-chip NSE 20 index has rallied of late, gaining 14.2% since mid-June. But the NSE 20 is still down 13.2% if a twelve-month perspective is taken. The main problem has been the crash in shares of Safaricom, which accounts for more than two-thirds of the market cap on Nairobi Securities Exchange. In the last twelve months, Safaricom’s shares lost 33.6% to KES 28.20 (EUR 0.2344). Although formerly the pioneer in mobile payments, Safaricom runs the risk of being left behind by more innovative fintechs in Kenya.


Are silver mining stocks a good choice now?

Silver is currently a big winner on global commodity markets. In the past four weeks, its price has risen 6.8% to USD 19.13 per ounce (31.1 gram). The price rally cuts silver’s loss since January to 17.9%. Is this a turning point for the commodity?

Like gold, silver is a precious metal. While gold is mainly used as an instrument for storing wealth, silver is largely used in manufacturing. Silver is one of the best electricity conductors in the world. You will find it in computers, in mobile phones and on printed circuit boards. Silver is also used to make solar cells and plasma display panels.

From an investor’s point of view, buying gold is completely different than betting on silver. Gold is often an investment prompted by fear. Silver, on the other hand, offers the opportunity to bet on rising demand and on an economic recovery.

In South Africa, you will find mining companies on the Johannesburg bourse that produce silver. While Anglogold Ashanti (ISIN: ZAE000043485) specialises in gold mining, which accounts for 97.6% of its revenue, it also extracts uranium, sulfuric acid and silver. However, Anglogold Ashanti has shed 30.5% to ZAR 228.58 (EUR 13.03) since January as the gold price too went down. Sibanye Stillwater (ISIN: ZAE000259701), which has a market cap of EUR 6.4 billion, is also active in silver-related projects. It otherwise specialises in the production of platinum group metals, which account for 57.4% of revenue. Gold extraction accounts for another 22.1% of Sibanye’s sales.

Beyond investing in shares, exchange traded notes (ETNs) allow you to be exposed to silver directly. For example, Standard Bank’s silver-linker (ISIN: ZAE000149316) replicates the silver future price in the local currency (ZAR). Absa Bank’s New Wave Silver ETN (ISIN: ZAE000162566) provides exposure to the silver spot price in ZAR. Investors should be aware that investing in commodities comes with great risk, and that due to their volatility, is not for the faint-hearted.



Egypt is Africa’s second-most active equity market

Egypt’s stock exchange is currently, after the Johannesburg Stock Exchange, the second-most active on the African continent. Just last week, the daily volume on the exchange totalled EUR 75.9 million. The second most active market was in Casablanca with a daily volume of EUR 6.2 million. That is significantly down from the previous week, when the daily trading volume in Casablanca totalled EUR 12.5 million.

However, few shares are being actively traded on the Egyptian exchange. One of the most active shares was recently Egyptian Housing Development & Reconstruction (EHDR). Consider that in Cairo, just 0.2% of the market capitalisation of all stocks (EUR 36.9 billion) were traded every day last week. In Casablanca, the ratio was at just 0.01%, in Nairobi at 0.04% and in Lagos at 0.006%.

As the example of Casablanca reflects, trading volumes on several African stock exchanges have been quite volatile as they are lacking active traders. On the stock exchange in Tunis, there was just EUR 1.2 million in daily volume last week but as much as EUR 28.6 million the week before. In Mauritius, it went up to EUR 2.2 million last week from EUR 0.6 million the week before.


Med Paper is a bet on economic recovery

Moroccan paper producer Med Paper (ISIN: MA0000011447) is coming back strong. The stock price gained 57.9% since the beginning of the year to MAD 31.48 (EUR 2.92) from its year low of MAD 19.93 on 11 March. It seems that investors are betting on a better economy in the kingdom.

In August, Med Paper announced an almost doubling of sales during the first half of 2022. These rose to MAD 64.5 million (EUR 6 million) from MAD 33.1 million the year before. However, the company did not release its earnings for the period. Med Paper also said net debt dipped to MAD 114.8 million (EUR 10.6 million) in the first half from MAD 115.25 million (EUR 10.7 million) the year before.

Med Paper is a cyclical share. In 2021, when the African economy was depressed by the Corona pandemic, its share struggled as its price largely depends on economic growth. On 24 December, Med Paper fell to MAD 20.71 from as much as 33.59 on 4 November. This was a decline of 38.3%. As the economic outlook is uncertain due to the geopolitical situation, we expect Med Paper’s share to remain volatile for the time being.