Emerging markets equities dominated the top global returns chart for the third quarter 2023 as domestic and foreign investors defied macro risks to lock into bargains in African and Asian markets.
Global stock data tracked by The Nation’s Market Intelligence at the weekend indicated that African and Asian stock markets dominated the top five global market returns, with Africa as the largest continental bloc within the world’s top biggest returns in the first nine months of the year.
The data included the most prominent stock markets and cut across the various tiers of advanced, emerging and frontier markets. These included United States, United Kingdom, Germany, Japan, France, Hong Kong, Russia, India, Brazil, China, Thailand, Turkiye, Saudi Arabia, Qatar and United Arab Emirates (UAE). African markets included Nigeria, South Africa, Kenya, Morocco, Ghana, Egypt and Mauritius.
Asian emerging market, Turkiye’s BIST 100 Index indicated highest return of 51.3 per cent. Egypt led the African group with the EGX 30 Index returning 38.2 per cent, the second highest return among tracked global stock markets. Ghana’s GSE Composite Index indicated average return of 29.8 per cent. Nigeria trailed with average return of 29.52 per cent. United States’ Nasdaq Index posted average return of 26.6 per cent, but this was moderated by average return of 12.2 per cent by the S & P 500 Index. Japan’s Nikkei 225 Index placed sixth with 22.1 per cent.
Other top-10 returns included Morocco’s Casablanca Masi Index, 10.7 per cent; Germany’s Xetra DAX, 10.5 per cent; France’s CAC 40 Index, 10.2 per cent and India’s BSE Sens Index, which posted average return of 8.2 per cent for the nine-month period.
Two of the other three African markets however posted negative returns. Kenya posted negative return of -10 per cent while South Africa witnessed marginal decline of 0.9 per cent. Mauritius meanwhile recorded modest positive return of 4.2 per cent.
Other global markets with year-to-date positive returns included United Kingdom’s FTSE All Share Index, 1.3 per cent; Brazil’s Ibovespa, 6.0 per cent; Russia’s RTS Index, 3.8 per cent; China’s Shanghai Composite Index, 0.7 per cent, Thailand’s SET Index, 5.5 per cent and Saudi Arabia’s Tadawul All Share Index, with average year-to-date return of 5.5 per cent.
However, Hong Kong’s Hang Seng, UAE’s ADX General Index and Qatar’s DSM 20 Index reported negative returns of -10.0 per cent; -4.2 per cent and -4.0 per cent respectively.
Nigeria’s benchmark index, the All Share Index (ASI) of the Nigerian Exchange (NGX), is a common value-based index and it tracks all share prices at the Exchange, a feature shared with benchmark indices of United Kingdom, South Africa, Saudi Arabia and UAE among others. Most other indices are selective indices, tracking a basket of stocks, although mostly representative of their markets.
A report by Afrinvest Securities showed that the global stock markets largely suffered a relapse in the month of September, which moderated returns across the markets.
According to the report, the global equities market ended September 2023 on a bearish note as fresh hawkish signal by the United States Fed and weak macroeconomic data releases in the Euro-area dampened investors’ sentiment.
The US Fed at the end of its FOMC meeting earlier in the month had hinted about a possible interest rate hike at its next meeting following two consecutive months of negative inflation surprises, which rose 0.2 and 0.5 percentage points in July and August to 3.7 per cent. In the Euro-area, there was negative market reaction to the region’s dismal trade performance, as surplus weakened to Euro 6.5 billion in August from Euro 18.5 billion in the prior month. European Central Bank (ECB) also hiked its benchmark rate by 25 basis points to 4.0 per cent, the highest since 1999.
The broad, global index, MSCI world equity index dropped by 4.4 per cent in September. In the US, the NASDAQ and S & P 500 indices dropped by 5.6 per cent and 4.5 per cent respectively. Germany’s XETRA DAX, Hong Kong’s Hang Seng, France’s CAC 40, and Japan’s Nikkei 225 indices declined by 3.5 per cent, 3.1 per cent, 2.5 per cent and 2.3 per cent respectively, as portfolio investors reassess the likely impact of the Fed’s new hawkish signal on year-end portfolio performances.
Conversely, the UK’s FTSE index gained 1.7 per cent, spurred by the positive but relatively weak GDP expansion of 0.2 per cent in second quarter 2023.
Across the BRICS markets, performance was negatively skewed as three of the five indices closed in the red. In Russia, the RTS index dipped by 4.9 per cent despite key interest rate increase of 100 basis points to 13.0 per cent aligning with market projections. Likewise, South Africa’s JSE and China’s Shanghai Composite indices depreciated by 3.4 per cent and 0.3 per cent respectively. Conversely, India’s BSE Sens and Brazil’s Ibovespa indices posted gains of 1.5 per cent and 0.5 per cent respectively, owing to attractive valuations.
In the African markets, Egypt’s EGX 30, Mauritius SEMDEX, and Ghana’s GSE Composite indices closed in the green with gains of 6.9 per cent, 2.9 per cent, and 2.8 per cent respectively. Ghana’s inflation rate had fallen for the first time in four months to 40.1 per cent – its lowest since September 2022. On the flip side, Kenya’s NSE 20 and Nigeria’s All Share indices fell by 2.0 per cent and 0.25 per cent respectively.
The Asian and Middle East markets were also bearish as Thailand’s SET and Saudi Arabia’s Tadawul indices dropped by 3.8 per cent each while UAE’s ADX general index fell by 0.3 per cent. However, Turkey’s BIST 100 and Qatar’s DSM 20 indices rose by 5.3 per cent and 0.6 per cent respectively.
Analysts at Afrinvest Securities said they expected extended risk-off sentiment across major markets this month as investors re-assess the potential impact of an impending interest rate increase by the FOMC.
