Where the real danger for Africa's financial markets lies

African stock markets escaped the global sell-off relatively well. We have identified six reasons for this. This doesn't mean the danger has been averted. It's just not where many suspects it to be.

By Christian Hiller von Gaertringen

African equity markets have held up relatively well amid the recent global sell-off at the beginning of the week, underscoring their partial insulation from broader capital market dynamics. While US and European indices have tumbled on the danger of global trade conflicts over tariffs, interest rate fears and geopolitical instability, key African exchanges have recorded smaller price declines than expected. Although not immune to global headwinds, the continent’s financial systems appear to have been less exposed to the factors fuelling the current crisis in developed economies.

• The S&P Africa 40 index lost 11.9% in a one-week period,

• and the Dow Jones African Titans index 11.5%.

• In the US, the S&P 500 tumbled 11.5%,

• and the Nasdaq 100 index 12.1%.

• In Europe, the Euro Stoxx 50 declined 10.3% in a one-week period,

• the Dax in Frankfurt 10.0%,

• and the CAC 40 in Paris 9.9%.

This performance has surprised some observers, given the traditionally volatile nature of frontier markets. Typically, in times of crisis, international investors are the first to withdraw their money from frontier and emerging markets to seek safety in established markets. That wasn't the case this time. We have identified six reasons for the relative resilience of African financial markets.