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Savage bear markets have an uncanny ability to expose myths and challenge long held beliefs. In our case, two fundamental premises underpinning our business model proved to be flawed - both negatively and positively.
Prior to the recent period of extreme market turbulence, years of statistical evidence confirmed that African stockmarkets had low correlations with global stock market indices, thereby offering a unique diversification opportunity and offering the ultimate investors’ dream of reducing risk while increasing returns. Indeed, in the early months of the global crash, African markets held up reasonably well before succumbing to global influences with awe
inspiring vengeance. The principle transmission mechanism turned out to be quite simple as falling commodity prices
seriously impacted on several commodity dependent African economies such as Zambia and Nigeria. This in turn caused their currencies to weaken precipitously spooking local and international investors alike, resulting in a market derating notwithstanding a reasonable stable earnings outlook...