Fitch Ratings expected Angola's banking sector to remain weak and fragmented in coming years, despite the Banco Nacional de Angola's (BNA) recent efforts to increase the banks' capital requirements. It said that eight out of the 29 banks operating in Angola will have to increase their paid-in capital this year in order to comply with the BNA's latest capital requirements. Also, it anticipated that increasing capital internally could be difficult for some banks unless they cut dividends, while the new minimum requirement could force some smaller banks to close. It considered that bank closures could be positive for the credit quality of the banking sector, as it would reduce the prevailing competitive pressure on the banks.  

In parallel, Fitch pointed out that the banking sector’s capital adequacy ratio reached 23.2% at the end of 2017. But it noted that the banks’ exposure to country risk is high, given that they operate almost exclusively in the domestic market and have a high proportion of their assets invested in domestic government securities. Further, it said that the sector's asset quality is weak, volatile and closely linked to local economic cycles. Overall, the agency considered that the outlook for Angolan banks is negative amid a decrease in lending, difficulties in accessing foreign currency and outflows of deposits.
Source: Fitch Ratings

Moody's Investors Service indicated that the African Continental Free Trade Area (ACFTA) agreement, which aims to create a single market for goods & services in Africa, will support intra-regional trade and improve the continent's credit profile. Also, it expected that higher intra-regional trade could help reduce growth volatility and develop the region's local economies, which would increase demand and investment in trade-related sectors. It noted that the volume of intra-African trade remains low despite increasing from 11% of the region's total trade activity in 2008 to 15% in recent years. It indicated that manufactured goods accounted for 43% of intra-African exports between 2012 and 2016, compared to 20% of the region's exports to the rest of the world. It said that countries with larger manufacturing bases and better infrastructure, such as Côte d'Ivoire, Egypt, Ethiopia, Kenya, Morocco, Namibia, South Africa and Tunisia, would benefit the most from increased trade integration. However, it noted that Africa's underdeveloped infrastructure, non-tariff barriers and finance constraints will limit the potential benefits of the ACFTA. It added that Africa’s trade finance gap exceeds $90bn annually, and that the lack of financing limits the region’s trade potential.  

Source: Moody's Investors Service

Trading in emerging markets (EM) debt instruments reached $4,901bn in 2017, constituting a decline of 5.1% from $5,167bn in 2016, due to lower uncertainty and less volatility in global markets. Trading in EM debt instruments reached $1,323bn in the first quarter, $1,132bn in the second quarter, $1,299bn in the third quarter and $1,147bn in the fourth quarter of 2017. Also, trading increased by 1.3% in the fourth quarter of 2017 from $1,132bn in the fourth quarter of 2016. Turnover in local-currency instruments reached $2,747bn in 2017, down by 14.4% from $3,209bn in 2016. Further, trading in sovereign and corporate Eurobonds stood at $2,120bn in 2017, up by 9.7% from $1,932bn in 2016. The volume of traded sovereign Eurobonds reached $1,163bn and accounted for 54.9% of total Eurobonds traded last year, while the volume of traded corporate Eurobonds reached $801bn or 37.8% of the total. In addition, turnover in warrants and options stood at $32bn in 2017, while loan assignments reached $1bn. The most frequently traded instruments in 2017 were Mexican fixed-income assets with a turnover of $699bn, or 14.3% of the total, followed by securities from Brazil with $651bn (13.3%), instruments from China with $400bn (8.2%), and fixed-income securities from India and South Africa with $382bn each (7.8% each).  

Source: EMTA