Post the August polls, Zambia has seen more bull that bear trajectories in the financial markets with the copper currency, the Kwacha, on a winning streak while the bond curve flattened as an interest rate ebb commenced. Empirical evidence has shown that bond rallies precede equity market bulls. The bourse in Africa’s second largest hotspot, the Lusaka Securities Exchange (LuSE) has extended a 20% bullish run, sending its Lusaka Securities All Share Index (LASI) to 5577.51, post the August 12 polls supported by an array of market related factors ranging from a stronger currency forecast and a compressing yield curve to closure of landmark M&A deals in the cement industry.
For the longest of time, the Zambian capital market performance has been constrained by a suppressed macroeconomic environment characterized by high yields on government securities and exchange rate weakness. The last three months nonetheless have seen subsiding political risks culminating in more positive confidence, currency and fixed income rally and greater political will on restoring fiscal fitness. Three stocks in the energy, confectionary and industrial sector lifted the LuSE ALSI this year.
LAFARGE, ZAMSUGAR AND COPPERBELT ENERGY CORPORATION STOCKS WERE THE WINNERS
The biggest contributor to market capitalization is Lafarge Zambia with a 569% YTD appreciation in share price after some successful price discovery following the $150 million Huaxin deal while Illovo’s Zambia Sugar reported a 300% YTD capital gains as Copperbelt Energy Corporation (CEC) appreciated 141% to date this year.
Copperbelt Energy Corporation CEC Plc Head Office in Nkana East of Kitwe, on the Copperbelt of Africa. CEC Plc was exposed to immense political risk in previous governments pronouncements ranging from an SI57 common carrier to a stale mate in the Bulk Supply Agreement (BSA) between the entity and ZESCO Ltd.
The political risk environment makes the CEC stock even more attractive with potential Bulk Supply Agreement (BSA) signing and likely reversal of the SI57 on the common carrier requirement that the previous government imposed. Recent tax cut pronouncements on the 5% ebb on income tax for corporates will provide further growth opportunity for the stocks.
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“Huaxin is the first company in cement industry to publish the white book of 2025-2060 ‘Carbon Peak Carbon Neutral’ Huaxin Carbon Emission Reduction Roadmap. As of June 30, 2021 the company’s ‘Cement Kiln High Efficiency Ecological Co-processing Solid Waste Technology’ with independent intellectual property rights has been applied in 20 cement plants in 7 provinces and cities in China,”
Capital Markets Association Board Member Alinani Simbule carried in an M&A note.
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A Lafarge cement plant on Kafue road in Lusaka the capital.
Huaxin Cement brings efficient climate risk sensitive technology at a time the world is tasked to implement Sustainable Development Goals (SDGs) and is relentlessly driving towards decarbonization. Zambia’s capital markets are gearing up for a green fund era that could see potential bond issuances and private equity & fund managers playing a pivotal role in using this conduit to finance climate risk sensitive projects. With a falling yield curve and an improving currency environment, capital markets are likely to see recovery.
The Kwacha Arbitrageur
