Ukraine war wipes $5b off top 30 listed firms
Saturday September 24 2022
A Ukrainian tank in Lugansk region to face Russian forces in a war that has dealt a major blow to the global economy, hurting growth, raised prices and fed inflation. PHOTO | AFP
African stockmarkets are counting losses as global economic crisis triggered by the Russian invasion of Ukraine weighs heavily on frontier and emerging economies leading to massive selloffs by foreign investors.
Latest quarterly market report by analysts at Africanfinancials shows that the market value of top 30 companies listed on sub-Saharan Africa’s (excluding South Africa’s) stockmarkets fell by 4.7 percent ($4.5 billion) to $92.04 billion from $96.57 billion during the 12 months period to August this year.
In August alone, they lost $7.4 billion in market value, with the share prices of key stocks such as MTN Group, Dangote Cement, MTN Nigeria, Safaricom, and Airtel Africa declining by 13 percent, eight percent, one percent, seven percent and 20 percent respectively.
The bear run on the African exchanges has largely been as a result of weakening currencies, high interest rates, soaring inflation and the high cost of living occasioned by high food and fuel prices.
The Kenyan stockmarket lost 22.3 percent of its value, ranking as the third worst performing after Zimbabwe and Ghana which lost 59.1 percent and 44.7 percent respectively, according to the report titled Sub-Sahara Africa Top 30 Companies (excluding South Africa).
Tanzania (8.7 percent), Rwanda (5.4 percent), Nigeria (12.6 percent), Seychelles (16.8 percent) and Zambia (21.7 percent) were the only five out of 14 that posted positive growth.
During the period, South African and Botswana currencies depreciated by 6.3 percent and 8.4 percent respectively.
Other currencies that fell significantly against the greenback were Nigeria (-3.5 percent), Kenya (-5.9 percent), Ghana (-38.6 percent), Côte d’Ivoire (-12.1 percent) and Malawi (-21.6 percent). Zimbabwe’s was down 13 percent in August and 67 percent year to date.
Debt distress
Emerging and frontier markets are seen as largely unattractive because of depreciating currencies, high inflation, increasing political instability and rising debt levels in the wake of Zambia and Sri Lanka having defaulted on their repayment obligations.
In May, Sri Lanka defaulted on its $12.5 billion outstanding Eurobond repayment for the first time as the country struggles with its worst financial crisis in more than 70 years.
In 2020, Zambia defaulted on its $42.5 million Eurobond repayment becoming the first African country to default on its debt during the Covid-19 pandemic.
In December 2021, the IMF reached a staff level agreement with Zambian authorities on a new arrangement under the Extended Credit Facility (ECF) for 2022-25 worth $1.3 billion.
Last month, the IMF Board approved the 38-month ECF for Zambia to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth in the country.
According to Oxford Economics Africa, as the Fed tightens policy, bondholders are demanding higher returns for investing in emerging markets.
The fallout from the Russia-Ukraine conflict has resulted in emerging market and developed countries’ central banks accelerating their monetary tightening cycles, acting more aggressively to contain inflationary shocks.
According to the IMF blog the war is a major blow to the global economy that will hurt growth and raise prices, hastening inflation.
It has led to reduced business confidence and higher investor uncertainty that is weighing on asset prices, tightening financial conditions and potentially spurring capital outflows from emerging markets.