Monday, 31 Jan 2011
The performance of African capital markets is set to overtake that of more developed markets, a report has said.
G4 markets Brazil, Germany, India and Japan were mentioned as those markets that would be outperformed by African markets, a trend which the report said would continue throughout 2011.
The report, titled, “African Markets Revealed,” prepared by Standard Bank, was made available to our correspondent on Friday.
The Head, African Research, Standard Bank, Mr. Stephen Bailey-Smith, said in the report, Emerging markets are in a strong position to increasingly contribute to global growth, while developed market policy makers have shown their determination to make the necessary deleveraging process in their countries as smooth as possible.
Emerging market growth outperformance will attract investment. This will see frontier markets becoming economically stronger and reducing the gap existing between them and the broader, more established, emerging market economies.
Since the beginning of this year, trading in the Nigerian capital market had recorded significant appreciation due to the return of more foreign investors into the market.
Specifically, the NSE Index, had last week, topped global indices with its 11.76 per cent or 2,913.88 basis points appreciation from 24,770.52 at the beginning of the year to close the week at 27,684.40 points, placing the NSE Index above most of its global peers in terms of performance.
Similarly, the market capitalisation of the listed equities gained N936bn or 11.8 per cent in the period under consideration, rising from N7.914tn to close at N8.849tn.
Speaking more on this, Bailey-Smith said, “The increase in the fortunes of the frontier markets will be fed by declining returns on assets across developed and more mature emerging market economies. As this occurs, investment flows will look down the risk curve towards frontier markets-including those in Africa.
It can be expected that frontier markets will outperform relative to developed markets and the more established emerging markets. In line with this, it can be expected that currencies of emerging markets will continue to outperform G4 currencies. The dollar depreciated by about 1.1 per cent against other developed market currencies during 2010, but by about 3.6 per cent against a trade-weighted basket of emerging market currencies.
The Managing Director, Financial Derivatives Limited, Mr. Bismarck Rewane, had said that the Nigerian market would have a robust outlook this year, stressing that the exchange would grow by 40 per cent.
This, he noted, was as a result of the efforts carried out by regulators to sanitise the market, adding that this would encourage foreign investors, who had previously exited the market to come back to invest in it.