African equity markets tumble as the global economic crisis triggered by the Russian invasion of Ukraine weighs heavily on border and emerging economies and prompts massive sell-offs by foreign investors.
The latest quarterly market report by analysts Africanfinancials shows that the market value of the 30 largest companies listed on the equity markets in sub-Saharan Africa (excluding South Africa) fell 4.7 percent (US$4.5 billion) in the 12 months to August -dollars) fell to $92.04 billion from $96.57 billion this year.
In August alone, they lost $7.4 billion in market value, with the share prices of major stocks including MTN Group, Dangote Cement, MTN Nigeria, Safaricom and Airtel Africa falling 13 percent, eight percent, one percent, seven percent and 20 percent respectively percent or
The downtrend in African stock markets is largely due to weakening currencies, high interest rates, rising inflation and the high cost of living caused by high food and fuel prices.
The Kenyan stock market lost 22.3 percent of its value, ranking third after Zimbabwe and Ghana, which fell 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 to have a positive recorded growth.
During the period, the currencies of South Africa and Botswana depreciated 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), Ivory Coast (-12.1 percent) and Malawi (-21.6 percent). Zimbabwe’s was down 13 percent in August and 67 percent year-to-date.
Emerging and frontier markets are seen as largely unattractive as currencies depreciate, high inflation rises, rising political instability and rising debt levels following Zambia and Sri Lanka’s defaults.
In May, Sri Lanka defaulted on its outstanding $12.5 billion Eurobond repayment for the first time as the country grapples with its worst financial crisis in more than 70 years.
In 2020, Zambia defaulted on the repayment of its US$42.5 million Eurobonds, becoming the first African country to default on its debt during the Covid-19 pandemic.
In December 2021, the IMF reached a staffing agreement with the Zambian authorities on a new agreement under the Extended Credit Facility (ECF) for 2022-25 worth US$1.3 billion.
Last month, the IMF Board approved the 38-month ECF for Zambia to restore macroeconomic stability and encourage higher, more resilient and inclusive growth in the country.
According to Oxford Economics Africa, bondholders are demanding higher yields on investments in emerging markets as the Fed tightens monetary policy.
The fallout from the Russia-Ukraine conflict has prompted central banks in both emerging and developed markets to accelerate their monetary tightening cycles and act 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 and accelerate inflation.
This has led to lower business confidence and increased investor uncertainty, which weighs on asset prices, tightening financing conditions and potentially fueling capital outflows from emerging markets.