Nigerian stocks slumped the most in eight months, yields on Kenyan dollar bonds surged to a record and African currencies declined on signs of a global economic slowdown and the worst outbreak of Ebola on record.
The Nigerian Stock Exchange All Share Index (NGSEINDX) fell for a ninth day, retreating 2 percent by the close in Lagos. Yields on Kenya’s $1.5 billion of Eurobonds due June 2024 climbed 16 basis points, adding to yesterday’s record 38-point jump, Bloomberg reports.
Investors in Africa joined a selloff from Tokyo to London. Treasuries and the dollar climbed after a U.S. report Wednesday showed a bigger-than-projected drop in retail sales, while Japanese industrial production unexpectedly slumped in August. Adding to concern about African assets is the Ebola outbreak, which has killed more than 4,000 people in West Africa and is showing no signs of abating, said Michael Keenan, a strategist at Barclays Africa Group Ltd.
While signs of slowing growth in the past buoyed emerging markets because of expectations that developed-nation central banks would maintain monetary stimulus, sentiment is changing, he said by phone from Johannesburg. Falling prices for commodities including oil are also weighing on African economies.
“Bad news is no longer good news for emerging markets,” Keenan said. “There comes a point where we have to become concerned about whether we’re going to create growth, and growth is critical for emerging markets.”
Ebola cases may be substantially underreported in Africa, U.S. Center for Disease Control Director Thomas Frieden said in prepared testimony today. Guinea, Liberia and Sierra Leone have been the hardest hit in the outbreak that started in December.
“The Ebola story has been underplayed until now,” Keenan said. “There is a huge amount of fear in the market about how the story will play out.”
South Africa’s rand declined for a third day, weakening 0.1 percent to 11.0856 per dollar by 5:12 p.m. in Johannesburg. The Zambian kwacha fell 0.6 percent and the Nigerian naira was down 0.3 percent to the lowest on a closing basis since March.
The MSCI Emerging Markets Index slid 1.2 percent to the lowest level since March, while commodities sank to a five-year low.
“Fears over the global economy are creating crazy swings in international markets,” John Cairns News – Bloomberg, head of currency strategy at Rand Merchant Bank in Johannesburg, said in an e-mailed note to clients. “It is clear that any further bad news on the global economy, or maybe even Ebola, will send markets running again.”
