African markets shrug off Fed tapering

Financial markets in Africa appear to have taken yesterday's decision by the US Fed to taper its monthly asset purchases under QE3 in their stride. Of the region's major economies, Kenyan and Nigerian stocks have been broadly flat, while South Africa's all-share index is up by around 1%. Meanwhile, the Kenyan shilling and South African rand have posted small gains against the US$. Looking ahead, despite today's muted reaction, we suspect that there is still likely to be further market turbulence as the US Fed continues to gradually wind down its asset purchases. As such, we have not fundamentally changed our views on how African markets will perform over the next couple of years. In particular, we expect further weakness in the rand over the course of 2014.