FMG (EU) Africa Fund lost 0.5% in the 2nd Quarter of 2017

Kenya was the top performing market in the second quarter, rallying 18% on the back of telecom giant Safaricom reporting impressive growth numbers. Mauritius gained +17%, boosted by the tier 1 bank MCB rallying 20% on solid quarterly results. Tunisia and the BRVM in West Africa were the laggards, closing the quarter slightly lower. However, on paper, the Nigerian stock exchange was the one which shone, with a huge gain of 26% with decent volumes coming through. In reality, the gains are overstated, as a de facto devaluation of around 23% took place, which has yet to be recorded by the big index houses. A new market-determined exchange rate for investors and exporters was introduced, which greatly improved the liquidity situation in the country and moved parallel rates closer to the official rate. On the back of the relaxed FX regime, MSCI announced that Nigeria not only would remain a part of its FM index, but its allocation would rise from 6.4% to 7.7%. On top of that, the country´s fiscal position has greatly improved with increased stability in the Nigeria Delta resulting in higher oil production. The moves gave comfort to equity investors who were net buyers during the quarter boosting sentiment further.

Key markets such as Kenya, Nigeria, Egypt and South Africa have all given positive signals in 2017 according to our technical models. Also, the strength seen in corporate earnings gives us confidence in the outlook for Africa.