African markets in 2015

Edwin Lefevre [whom I admire and who wrote the seminal Reminiscences of a Stock Market Operator in 1923] said:

”You can spot, for instance, where the buying is only a trifle better than the selling. A battle goes on in the stock market and the tape is your telescope. You can depend upon it seven out of ten cases”

That is how I first came to take an interest in the message of the tape. The fluctuations were from the first associated in my mind with upward or downward movements. Of course there is always a reason for fluctuations, but the tape does not concern itself with the why and wherefore. It doesn’t go into explanations. I didn’t ask the tape why when I was fourteen, and I don’t ask it to-day, at forty. The reason for what a certain stock does to-day may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now not tomorrow. The reason can wait. But you must act instantly or be left. Time and again I see this happen.

Now lets take a look at the African tape and lets start with Nigeria because after all it is now [after last years rebasing] the elephant in the Sub Saharan Africa room.

Nigeria’s Central Bank chief said on Thursday there was “no need to panic” about a slide in the currency, after figures showed the bank had been burning through more than $110 million a day in a vain attempt to defend it.

In my experience when a Central Banker tells you there is ”no need to panic” it is actually time to panic which is what investors are doing big time. The Naira hit a record low Thursday of 206.60 and has lost 25 per cent of its value versus the dollar in 90 days. An equivalent move in the shilling would have it trading at close to 115. This is a melt-down in the Naira pure and simple. On January 21st I said this to Reuters: “The currency is headed to 220 … and Emefiele’s finger in the dyke strategy is about to be overwhelmed by a tsunami.”

That tsunami to which I referred is now in play.

The Nigerian All Share has slumped -20.41 per cent this year and is the worst performing index in the world in 2015. Investors are taking a more than 40 per cent haircut [when you account for the currency] and frankly, there is no turnaround in sight not with a delayed presidential poll and a neck and neck position of 42 per cent for each candidate.

Nigeria’s woes are entirely correlated to the oil price and it is oil that created a negative spillover in Nigeria, just as it did in Russia, Venezuela, and Angola.

Here, our oil exploration is a no-go. Tullow Oil declared that they are decommissioning three out of four rigs.

“We will gradually wind them [three rigs] down throughout the year; we’ve still allocated significant capital to Kenya [and plan to] continue exploration at a more modest pace as you’d expect with the oil price,” Mr McDade said to the FT. Kenya’s oil exploration has become collateral damage in the oil warfare game.

Now all this destabilisation and interference in Naira Land has sent monies that were marked with the tag ‘Destination Lagos’ to ‘Destination Egypt’ [The EGX30 has stormed +9.23 per centr higher in 2015 and is the 3rd best performing index world-wide in 2015]. In South Africa [The All Share surged to an all time high last week and is +6.51 per cent this year] and in Kenya the Nairobi All Share closed at a record high every session last week and is +5.56 per cent in 2015.