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Listed equity performance

Listed equity performance over the last five years based on local currency returns of the major African listed equity markets have been consistent with the continent’s growth expectations. Certain markets have suffered from political strife, but have recovered well to continue returning significant growth to investors. 2014 was a year categorised by general underperformance relative to global markets as commodity prices slumped; however some of the smaller markets did well with Egypt returning to stellar performance.

 

Note: The maximum period for analysis is 4 years as the date of inception of the GSE Composite Index (Ghana) is January 2011.

 

Note: The maximum period for analysis is 4 years as the date of inception of the GSE Composite Index (Ghana) is January 2011.

Although index returns will be quoted in local currency, international investors will assess the return on their investment in their domestic currency, for example the US dollar. Exchange rate fluctuations of African currencies to the US dollar, primarily due to the heavy reliance on commodity prices for exports, add additional volatility to the local currency return. The success of currency pegging and exchange control regulations to reduce exchange rate fluctuations has been mixed, resulting in the persistence of this risk.

Much work is being done by providers across the continent to enable the hedging of currencies. This is still a relatively expensive exercise as the derivatives that are written rely on the liquidity of the underlying currencies. As with the equity markets in general, the liquidity of African currencies is improving, with spreads narrowing over time. Macro-economic shocks do tend to significantly affect the tradability and liquidity of currencies.
 

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