According to a report by African Financials, Sub-Saharan Africa’s stock markets fell 1.2% in US$ terms in August 2023 and are down 12.8% year to date. However, eight of the fourteen SSA ex-SA stock markets have positive US$ returns year to date.
The World Bank forecasts that Sub-Saharan Africa’s GDP will grow by 3.6% in 2023 and 4.0% in 2024. This economic growth will likely boost demand for goods and services, which could benefit companies listed on Sub-Saharan African stock exchanges.
The report also noted that corporate earnings in Sub-Saharan Africa are expected to grow in the coming months, as companies benefit from economic growth and rising commodity prices.
The market cap of the Top 30 companies for August 2023 was US$82bn, down 6% in July. Internationally listed stocks account for 38% of the Top 30 and Telecoms & Technology for 51%.
However, there are also a number of factors that could weigh on Sub-Saharan Africa’s stock markets in the coming months, including:
Rising interest rates: Central banks around the world are raising interest rates in an effort to combat inflation. This could make it more expensive for companies to borrow money, which could weigh on corporate earnings and share prices.
Geopolitical tensions: The ongoing war in Ukraine and other geopolitical tensions could lead to volatility in global financial markets, which could also impact Sub-Saharan Africa’s stock markets.
Currency weakness: The currencies of some Sub-Saharan African countries have weakened against the US dollar in recent months. This could make it more expensive for companies to import goods and services, which could weigh on corporate earnings and share prices.
The report concluded that Sub-Saharan Africa’s stock markets will likely continue to be volatile in the coming months. However, several factors could support positive performance, such as economic growth, corporate earnings growth, and increased foreign investment.
It also urged investors to consider risks and rewards carefully before investing in Sub-Saharan Africa’s stock markets.