The Fund fell -1,7% in June, worse than the benchmark index MSCI EFM Africa ex South Africa Net Total Return Index, which fell -0,3%. So far this year the Fund has fallen by -20,4%, slightly behind the benchmark index, which has fallen -19,3%. At a country level, overweights in Egypt (44% of fund assets) and underweights in Kenya (3%) contributed most positively relative the benchmark. The Fund’s overweights in Nigeria (21% of fund assets) and overweights in Ghana (7%) contributed most negatively. At the sector level, overweights in Consumer Discretionary along with underweights in Materials contributed most positively, while the underweights in Financials and underweights in Consumer Staples contributed most negatively relative the benchmark index. The Swedish krona strengthened 1.1% versus the USD in June, decreasing the SEK return of the Fund (all changes in SEK).
No major changes were made in the Fund in June
African equity markets fell slightly (MSCI EFM Africa xSA Net TR -0.3%), outperforming other Frontier markets (MSCI FMxGCC Net TR), which fell 0.6% during the month. South Africa was the best African stock market rising 9% followed by Namibia, rising 5.1%. Nigeria was the worst African market declining by 4.1% while Ghana was the second-worst performer, falling 3.3%. (all changes in SEK)
Egypt (Hermes Index +4.2% in June, -20.4% year to date) recovered with news on a stand by arrangement from the IMF of USD 5.2bn, of which USD 2bn is now available and the rest after reviews. News of Egypt, Sudan, and Ethiopia returning to the negotiation table regarding the filling of the Grand Ethiopian Renaissance Dam (GERD) also helped spreading a positive mood. Egypt and Sudan are pushing for a slower pace of filling, not wanting to risk their water supply while Ethiopia wants a faster pace to be able to increase power production from the dam. News of removing lockdowns and curfews also helped. The central bank kept interest rates unchanged at 10.25%, in line with expectations, at their June meeting.
Nigeria’s (Nigeria Stock Exchange Main Index -4.1% in June, -8.5% year to date) stock market fell again with no apparent buyers around. Foreigners blame lack of liquidity and locals are searching for a trigger. The slight recovery in oil prices to over USD 40 per barrel has not helped much.
Kenya (Nairobi All Share Index -0.2% in June, -19.5% year to date) traded sideways, with banks and telecoms in focus. More details from the banks regarding the COVID-19 impact on loan quality dampened the mood somewhat, and news regarding mobile money when transactions below a certain threshold to stay free of charge hurt the telecom giant Safaricom. In the end, the impact on share prices was unnoticeable.
Morocco’s (MASI Free Float All Shares Index +3.4% in June, -17% year to date) central bank delivered the biggest rate cut in history when it cut rates by 0.5%-point to 1.5% in order to stimulate the economy. Morocco also scrapped most of its curfew rules in the month, which will help restart growth as things return to normal. The market reaction was positive.
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