Emerging market equities are on a rally. They, however, remain cheap from a relative pricing perspective in comparison to their historic means. At current valuations it seems that the entire market is attractive. A line of thinking that has erased wealth than most others. A long-winded way of saying:
It's a great time to buy the right stocks.
The decline of African capital markets is a serious issue with many causes. The evidence is the declining number of listings and the complete absence of capital raising through stock exchanges. First, high inflation and heavy government borrowing block equity markets growth. This limits private capital investment. Next, the cost of trading shares is high, which stops people from buying and selling as often as they might.
Market structures are also unbalanced. Foreign investors face limits, fx and tax costs are high, and there is too much regulatory interference. These issues lead to low liquidity, so companies have small, narrow groups of shareholders. Poor investor relations practices make things worse because investors don’t get enough information or access to easy cost-effective trading. This lowers overall trust and makes people less likely to invest.
Due to low trading, shares are undervalued, and company-led share buybacks take even more shares off the market. This further limits trading and weakens liquidity.
Finally, many companies decide to de-list, which reduces the number of options for investors. Markets go backwards.
No listings, no capital raising, no investment.
If these structural problems continue, they will hurt the health and future of African public capital markets.
There is an anti-dote, of sorts.
Big News for Zambia's Stock Exchange!
The Lusaka Securities Exchange Plc (LuSE) and Financial Sector Deepening Africa (FSD Africa) have signed a historic MoU to revise LuSE Rules!
What does this mean?
Streamlined operations
Increased market participation
Alignment with global sustainable finance trends
Capacity-building initiatives
Boost to listings, trading, and wealth creation
This partnership will enhance Zambia's capital markets, creating jobs, reducing poverty, and driving prosperity!
LuSE CEO, Nicholas Kabaso: "This initiative will accelerate listings, enhance trading, and foster wealth creation for investors."
FSD Africa CEO, Mark Napier "We're proud to support LuSE in strengthening Zambia's capital markets."
Our hashtag
#CapitalMarkets progress report is here! As one of the key highlights of our two-day hashtag
#SustainableCapitalMarketsConference, we unveiled our latest progress report, highlighting milestones achieved through our catalytic work in hashtag
#Africa’s capital markets.
Some of our key achievements include:
💰 Catalysing $1.2 billion in sustainable local currency capital
💼 Launching the Dhamana Guarantee Company for credit enhancement
🚰 Issuing hashtag
#Tanzania’s first water bond to fund critical infrastructure
🤝 Establishing the Pan-African Fund Managers Association (PAFMA) and Africa Pension Supervisors Association (APSA) to strengthen market collaboration
Why capital markets matter:
Capital markets are a powerhouse for hashtag
#EconomicGrowth, unlocking access to essential finance for both the public and private sectors to address hashtag
#biodiversity loss, and more. By fostering local currency capital markets, we can reduce currency risks and build a resilient financial ecosystem that’s equipped to withstand external shocks.
The report's key themes include financing solutions for hashtag
#ClimateAction, and biodiversity; bridging Africa’s financing gap by mobilising private domestic capital and deepening local capital markets to meet critical funding needs; and empowering Africa’s financial markets with tools and resources for large-scale impact.
Angola stock market is officially open!! Yesterday, ENSA (Angola's largest insurer) in an oversubscribed listing, issued 30% of its shares to the public, now joining other local big names like BAI and Caixa Geral. And despite high inflationary pressures, IPO and M&A activity has picked up significantly mainly off the back of the Government's ambitious national privatization program. But, as strong gains tend to stretch valuations relative to fundamentals like impact of interest rates, the cost of financing, and earnings. How far are investors willing to chase performance?
There is now an ever growing sense of hype around the "who's next in line" IPO. And no wonder!! Emerging markets IPOs tend to outperform their developed markets counterparts. Take the US vs Europe, Middle-East, India and Africa (EMEIA) region for example:
• While the US has been experiencing a prolonged state of low growth of its IPO markets (both on proceeds and performance), with recurrent themes of "companies staying private for longer",
• Emerging and developing markets, on the other hand, are on the rise. Just last year alone, has outperformed its counterpart by a long shot - first day average return and offer-to-current price, both registering 10.1% (USA 9.7%), and 101.9% (USA 1.4%) respectively.
Despite this, in the long-run there are both liquidity and negative loading to value issues to consider:
• Stocks in emerging markets can suffer from lower liquidity, meaning that large price swings are possible with relatively small trades. This can lead to higher volatility and larger bid-ask spreads compared to similar companies in developed markets;
• Research shows that IPO investments tend to behave like high beta stocks with negative loading to the value factor (in other words, they behave more like a small growth, low profitability investment).
That being said, I remind our investors that it's not the arithmetic returns on an investment that matter, but rather the geometric average returns, because returns compound over time. More volatile assets tend to have a bigger gap between arithmetic and geometric returns... but more on this later on another post.
So finding an already existing well diversified mutual fund or ETF to get in on the action of initial IPO allotments, avoid single asset beta and post fade reactions, is the rule of the game here. While an individual stock investment will deliver a random outcome essentially driven by the specific risk of the company, a more balanced and diversified portfolio should allow the investor to counter the impact of post IPO volatility.
Going back to basics in portfolio theory, the risk of an investment portfolio is defined not by the average of its underlying assets, but by how they move in tandem - i.e. their correlation. In the words of the great Markowitz, diversification is the only free lunch in investing!!
Hi family,
I am super interested in these areas to collaboratively working with you guys. Who are also interested in?!
Mayaya Kashinje Singu Mack – a social entrepreneur, researcher and consultant; specialized and experienced in social enterprises and social entrepreneurship development, project planning and management, organizational and community development, forest and landscape restoration, beekeeping; and regenerative agriculture.
Mayaya is thrilled to attain sustainable community development -UNSDGs2030 and AU2063 with vast field and lived experiences in NGO sector for 10+ years; working as social enterprise researcher and consultant, forest-beekeeping extension and consulting, community-based project developer; NGO leadership and management trainer, permaculture trainer - food forest systems designer and consultant; founded and coordinating several local and international organizations and programmes across the African continent and globally.
He is a National Focal Point (NFP) at GNDR Tanzania; an ED & founder of Sustainable Beekeeping and Human Development (SuBeHuDe); Co-founder & Program Coordinator at The New Wash Burn Foundation (NWBF); a mentor at Shinyanga Ecovillage Transition Youth Initiative (SET-Youth–I), and President & Managing Director at Sustainable Beekeeping for Development Company (SBDC) - a social enterprise for bees products, beekeeping value chain development and product innovation focusing on pure natural honey bee honey and beeswax processing, packaging and supplies across Tanzania and beyond.
He believe in the power of network and social movements to change the world. He is passionate about building networks who can drive the transition from not-work to network that effective engagement and interaction to address three dimensions of sustainability - Social, Economic and Environmental Development (SEED) aiming to create socially, economically and environmentally sustainable activities that allows both land and people to flourish while create a healthy and prosperous future for everyone.
Mayaya Kashinje Singu Mack – a social entrepreneur, researcher and consultant; specialized and experienced in social enterprises and social entrepreneurship development, project planning and management, organizational and community development, forest and landscape restoration, beekeeping; and regenerative agriculture.
Mayaya is thrilled to attain sustainable community development -UNSDGs2030 and AU2063 with vast field and lived experiences in NGO sector for 10+ years; working as social enterprise researcher and consultant, forest-beekeeping extension and consulting, community-based project developer; NGO leadership and management trainer, permaculture trainer - food forest systems designer and consultant; founded and coordinating several local and international organizations and programmes across the African continent and globally.
He is a National Focal Point (NFP) at GNDR Tanzania; an ED & founder of Sustainable Beekeeping and Human Development (SuBeHuDe); Co-founder & Program Coordinator at The New Wash Burn Foundation (NWBF); a mentor at Shinyanga Ecovillage Transition Youth Initiative (SET-Youth–I), and President & Managing Director at Sustainable Beekeeping for Development Company (SBDC) - a social enterprise for bees products, beekeeping value chain development and product innovation focusing on pure natural honey bee honey and beeswax processing, packaging and supplies across Tanzania and beyond.
He believe in the power of network and social movements to change the world. He is passionate about building networks who can drive the transition from not-work to network that effective engagement and interaction to address three dimensions of sustainability - Social, Economic and Environmental Development (SEED) aiming to create socially, economically and environmentally sustainable activities that allows both land and people to flourish while create a healthy and prosperous future for everyone.