African and Caribbean markets struggled to shake off holiday blues in the New Year after riding higher on Christmas euphoria. TNJ‘s AfriCarib index climbed to a two-month high in December amid speculation that the global economic recovery was taking hold and growth was accelerating in Asia and the United States. Stronger growth is expected to spur capital flows from the U.S. and China into frontier markets. The advance for the markets might be capped, however, by several challenges ahead, including rising food prices and geopolitical tensions that could scale back growth prospects for these emerging and frontier economies.
Nigeria is scheduled to hold presidential elections soon, while the political situation in Ivory Coast remains precarious after a bitterly contested November election. The stock index in Nigeria surged 4 percent in December, while Ivory Coast’s key equity gauge plunged as investments dried up. Kenya’s index eased in early January after posting gains of 7 percent in December and 3 percent over the past three months. Ghana’s index rebounded in early January after a sharp fall in the prior month, while South Africa’s index eased 3 percent after a 7 percent surge in December. The Egyptian bourse inched up 1 percent last month on top of a 6 percent jump in the last three months.
In the Caribbean, Trinidadian and Jamaican equities improved, while the Barbados market paused in December. Jamaican stocks gained 1.3 percent last month after a 6 percent rally for November, signaling renewed interest in stocks, though growth challenges remain. The Barbados market continued to underperform as the country’s economy continued to be impacted by a slowdown in tourism activity. A challenging year lies ahead for the region. Interest rates are expected to remain low and given subdued domestic economic activity, companies across a broad range of sectors may have trouble growing revenue and net profits. Investors may have to keep a close eye on dividend stocks such as Unilever, Prestige and National Commercial Bank of Jamaica as a way to generate returns. Dividend yields for a few stocks continue to be higher than that of money-market and deposit rates.