Active Management Strategy will be key to overcome currency challenges

We briefly review indices performance of key regions in Africa. We note that trends in Nigeria appear to show signs of stabilizing. (All data herein from BBG, as of 7/14/15.)

Country	One-Year Return (USD)	YTD Return 2015 (USD)
Egypt	-25.87%	-26.78%
Kenya	-17.42%	-18.25%
Nigeria	-40.13%	-16.55%
South Africa	-12.45%	-1.97%

This compares to general indices performance.

Index	One-Year Return (USD)	YTD Return 2015 (USD)
MSCI EM	-9.46%	-0.23%
MSCI FM	-16.32%	-3.66%
S&P 500	8.87%	3.55%
MSCI World	3.18%	4.66%

Note that the strong dollar continues to weigh on indices performance and is a key factor for the disparity between the S&P 500 returns versus the other MSCI benchmarks.

Country	One-Year Return (USD)	YTD Return 2015 (USD)
Egypt EGP	-8.66%	-8.64%
Kenya KES	-13.66%	-10.83%
Nigeria NGN	-18.07%	-7.34%
South Africa ZAR	-13.37%	-6.11%

Nigeria and South Africa currencies have had some signs of strengthening.

Kenya and Uganda have been actively tightening their monetary policies to shore up their currencies and fight inflation. Kenya has raised its benchmark interest rate by 300 basis points over the past two months to 11.5%: Kenyan Treasury Secretary Henry Rotich now believes that the central bank has room to pause its rate-tightening cycle. The Bank of Uganda likewise raised its benchmark interest rate by 150 basis points at an unscheduled meeting this week, the third increase this year.

We argue that the more developed the emerging economy, the more export-dependent the economy, and thus the more that country benefits from a strong dollar. Note the disparity even among BRIC countries. All-in, this argues for the long-term potential of Africa and the importance of an active management strategy to navigate through the near-term challenges.

Country	One-Year Return (USD)	YTD Return 2015 (USD)
Brazil	-32.31%	-9.71%
Russia	-32.46%	16.32%
India	7.63%	1.94%
China	89.28%	16.43%

The views expressed are opinions subject to change and are not investment advice.

Nile Capital Management

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