The Zimbabwe Stock Exchange is currently the best performing stock market in Africa

Expansionary monetary policies are the primary drivers of strong performance in African capital markets

Third world economies facing inflationary pressures have a good chance of growing best-performing capital markets

Zimbabwe Stock Exchange

Harare-The Zimbabwe Stock Exchange is currently the best performing stock market in Africa, with a year-to-date return of 34.67% in USD terms, and 83.41% in inflation-adjusted ZWL currency.

Typically, the stock market and economic performance are closely interrelated, with one influencing the other. When the stock market is performing well, it is usually a sign that the economy is growing and doing well.

In Zimbabwe,however, macroeconomic instability persists, brought about by sudden policy changes, soaring inflation, a deteriorating currency, expensive borrowing, and a prolonged electricity crisis affecting market performance theory.

The stock market performances have been bolstered by increased liquidity in the market due to an expansionary monetary policy initiated by the payment of contractors and a 400% increase in salaries for uniformed forces civil servants. This has led to speculative borrowing, further bolstering stock market performance..

In the short-term, the lack of structural reforms to improve the business environment, combined with soaring inflation and foreign exchange shortages, will dampen economic growth. Nevertheless, the potential injection of election funding could further boost the performance of the ZSE, as it will increase liquidity in circulation and consequently drive GDP growth in the 2023-27 period.

Malawi Stock Exchange

The Malawi Stock Exchange (MSE) has recorded the second highest year-to-date USD returns of 20.48% and 20.8% in inflation-adjusted terms of the Malawian Kwacha, making it the best performing stock market after the Zimbabwe Stock Exchange.

However, this seems to be in stark contrast to the current state of the Malawi economy, which is facing extreme levels of poverty, foreign aid dependency, and the devastating effects of climate change and drought. The country is also grappling with galloping inflation, corruption, and the severe impacts of Cyclone Fred.

Malawi's economic outlook for 2023 is, however, optimistic of growth, with growth expected to be driven by an expanding agricultural sector, foreign investment, and economic reforms. These measures, such as tax reductions, the liberalization of certain industries, and infrastructure improvements, are likely to attract more foreign investment and spur further growth in the country. Inflation has also been addressed with monetary policies such as raising interest rates and tightening monetary policy.

Nigeria Stock Exchange

The Nigerian Stock Exchange (NSE) is the largest capital market in Africa by market capitalization and the second largest by listed entities. Year-to-date, the market has been one of the best performers, with a return of +4.21 USD and an inflation-adjusted Nigerian Naira return of +7.21%.

After Bola Tinubu, the candidate of the ruling All Progressives Congress, was elected as Nigerian president on February 25th, Opposition parties started vowing to contest the result, and it slowed the capital market performance to nearly flat growth (0.33% bi-weekly return)

The newly-elected President has declared an expansionary policy that is expected to positively impact the stock market. However, according to the Economist Intelligent Unit (EIU), real GDP growth is projected to decline from an estimated 3.1% in 2022 to 2.3% by 2027.

However, oil production is expected to increase despite the global oil prices declining. Inflation remains stubbornly high, which will likely keep interest rates elevated, further contributing to the return of the NSE. This will likely have a positive impact on the economy by stimulating economic growth and employment opportunities.

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