03 July 2018 ( Lagos ) : The second quarter of the year has been a harsh period for African financial markets on the back of capital flight triggered by investor concerns over a strengthening dollar, rising U.S. treasury rates, and worsening trade tensions between the U.S. and China. 

Bloomberg data showed that the FMI Bloomberg African Bond Index which tracks local currency bonds has lost 12% of its dollar value in Q2’18 whilst yields on African Eurobonds have climbed to two-year highs. 

Unsurprisingly, the yield on Nigeria’s 2032 Eurobond has risen from 6.9% at the end of March to 8.2% yesterday. African equities have been similarly hit, shedding 11% on average in the quarter, compared to emerging market average of 10%. Notably, the Global X MSCI Nigeria ETF, the only U.S. ETF that solely tracks Nigerian equities was down more than 25% in Q2’18 amidst outflows of $25 million (c.30% of market value at the start of the quarter). 

There are likely to be more choppy times ahead amid U.S. monetary tightening and persistent geopolitical worries, whilst a slightly softer oil price outlook may weigh on oil exporters like Nigeria. 

Source: Analysts at Vetiva Capital Management Limited.

Reporting for EasyKobo on Tuesday, 3 July 2018 in Lagos, Nigeria