East Africa: Investors Opt for Bonds to Escape Wrath of Covid-19

East African stockmarkets have started feeling the impact of Coronavirus that has hit global economies after three countries in the region confirmed outbreak of the virus.

According to Economists the coronavirus fears have sparked investor rush for government bonds away from the volatile stockmarkets.

The UK-based business publication Financial Times, the debt rally globally has underscored the enduring appeal of bonds as a counterweight that gains when riskier investments decline.

Bond markets around the world remain some way short of the extreme levels hit in August and September last year, when more than $17 trillion of bonds carried a sub-zero yield.

The EastAfrican has learnt that stockmarket investors are worried of the long term economic impact of the Covid-19, and the market has started pricing in such fears pushing share prices to record lows, as investors dump stocks.

"The disruption will likely be negative for economic activity and asset prices. In the very near-term, there is a flight to safety, with negative implications for equity markets across emerging markets. Investors will also take the time to assess the growth fallout from the Coronavirus situation," Razia Khan, Standard Chartered Bank’s chief economist in-charge of Africa and Middle East region told The EastAfrican.

"While individual companies may buck the overall trend–the focus on mobile money in Kenya and elsewhere for example, home delivery services–it is a bearish environment for equities more generally. The global economy has not seen a shock of this nature before, with a significant disruption to services and household consumption across multiple geographies," added Ms Khan

Market analysts said local equity markets have started witnessing an increase in portfolio outflow that are pushing share prices to record lows.

"Investors should take advantage of the lower prices to purchase value stocks that are currently trading below their fair values," said analysts at AIB Capital.

On Friday last week, stock prices of all the eight firms listed on the Rwanda Stock Exchange (RSE) remained unchanged while the Rwanda Share Index (RSI) and All Share Index remained unchanged at 121.87 and 150.16 respectively.

But the Rwandan bond market recorded a total of rwf 458.86 million ($476,757) worth of bond traded in seven (7) deals during the entire week.In Kenya, equity turnover on the Nairobi Securities Exchange fell by 3 percent to Ksh778.82 million ($7.78 million) from Ksh802.35 million ($8.02 million) while bond turnover increased 46 percent to Ksh5.52 billion ($55.2 million) from Ksh3.77 billion ($37.7 million) in the same period. The […]

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