Many of the investment funds that target the African stocks started the 2016 on the wrong foot. The performance for about sixty of these companies which are followed by the Ecofin Agency on Morningstar are all in the red, with a loss in profitability of more than 30%.

No segment was spared. Be it the assets management, listed companies, securities investment institutions, profits are plummeting at all sides. With a slide of 34.6% over the past year, Neptune Africa is one of the funds to have suffered most of the crisis that African markets are presently going through.  

The sector most affected by the disinvestment phenomenon is the mining sector whose assets have highly degraded due to the lower price of commodities. To overcome the turmoil, these funds should keep a prudent position.

The question now is to know till when these funds should have to as the financial crisis China currently faces is deeper than it seems. The all-powerful directed capitalism seems to have exhausted the delights of speculative enrichment. Experts explain that many people took significant loans to take advantage of the high profits offered by China. And now the inflation is back, and the economy is struggling, everyone wants to sell its securities to pay debts. “It will take some time before things get back to normal and no one can be sure as to when China will fall back on its feet,” said Kooki Kooyman, portfolio manager at Denker Capital on a South African radio.

Whilst South African Rand strengthened a bit on January 12, 2016, Nigeria’s, Egypt’s, and Kenya’s currencies are still struggling.

The Paris and Frankfurt stocks were also still in the green at the beginning of the 12th’s afternoon. However, for investment funds targeting African stocks’ assets, net inventory value is still in the red. Out of the most performing companies followed by Ecofin, Invest AD SICAV Emerging Africa has shown a negative return of -1.8% since the beginning of the year.

Idriss Linge