- Nigerian equities bottom of pile for frontier markets
- Bargains sought as Kenya index lingers in bear market
Kenyan stocks rallied on Friday to pare the biggest weekly loss since January as investors used a 12-day streak to hunt for bargains. Nigerian equities, the biggest losers among frontier markets so far in the second half, trimmed a third week of declines.
The sub-Saharan nations have led a retreat among 25 countries on the MSCI Frontier Markets Index amid a rout in global assets, spurred by evidence that an expansion in China’s economy is slowing. Six of the 10 worst performing equities in the index since the end of June are Nigerian companies.
The FTSE NSE Kenya 25 Index, in a bear market since Aug. 5, jumped 2.8 percent to 179.73 by the close in Nairobi, the capital, reducing this week’s decrease to 6.2 percent. The Nigerian Stock Exchange All Share Index rose 2.2 percent to 28,831.97 for a weekly retreat of 3.5 percent.
“There are investors who have come in to take advantage of discounts,” Mwenda Rarama, an analyst at CBA Capital Ltd. in Nairobi, said. “These are price levels we haven’t seen in over 15 months.”
Nigeria, Africa’s largest economy and oil producer, is struggling to cope with crude prices near six-year lows, while a delay by President Muhammadu Buhari in naming his cabinet since taking power in May is deterring investors seeking direction on economic policy. In Kenya, growth is slowing as the country’s $1 billion-a-year tourism industry contracts following a spate of attacks by Islamist militants and a drought cuts tea crops, hurting the East African nation’s largest sources of foreign exchange.
The MSCI EFM Africa ex-South Africa Index dropped 7.3 percent this month, compared with a 5.9 percent decrease in the MSCI Frontier Markets Index.
While there is no near-term catalyst to drive equities higher, it might be time for investors with five-year views to buy selected Nigerian and Kenyan stocks, according to Ali Khalpey, head of equities at Exotix Partners LLP in London. His top picks include Guaranty Trust Bank Plc, Zenith Bank Plc, Equity Group Holdings Ltd., Kenya Commercial Bank Ltd., Safaricom and Nigerian Breweries Plc.
“You’re getting these at five-, six- or seven-year lows in terms of multiples,” he said on Thursday.
(An earlier version of this story was corrected to show Nigeria’s stock market fell for a third week and not a fourth in the first paragraph.)