Investors in the Nigerian Stock market are surely having good returns, amid prevailing macro-disruptive global financial market

WHAT WE KNOW
Data from Bloomberg reveals that the Nigerian Stock Index ranks 3rd globally with respect to stock index performances; YTD performance has improved to 13.43%. In October alone, investors made a gain of about N1.934 trillion, as the Nigerian bourse recorded its best monthly gain since 2018.

Emmanuel Orji (an Emerging market/Fixed income trader) in a phone chat to Nairametrics, gave detailed insights into why it seems the Nigerian Stock Market is receiving significant cash flows in relation to low yields prevailing in the Nigerian debt market;

“It’s no surprise seeing the Nigerian equities market among top 3 best performing indexes year to date, after the outlier performance we had in October. The NSEASI was up 13.79% MTD in October, its biggest monthly gain since January 2018, which was largely driven by robust system liquidity coupled with low yields in the fixed income space.

“Aside massive liquidity inflow in October (c.NGN1.7 trillion from OMO maturity repayment and coupon payment), reduced supply at the October Bond auction, coupled with closing rate of 0.98% (1-yr paper) at the NTB auction further strengthened the bullish momentum,” Orji said.

Abiodun Keripe (MD, Afrinvest Research) in an exclusive interview with Nairametrics also spoke on key macros boosting the Nigerian Stock Exchange. “Nigeria now ranks 3rd best-performing stock market in the world out of a basket of 93 indices tracked by Bloomberg. This performance is majorly driven by local investors, given the low yield environment and continued, albeit slow-paced and uneven, rebound in economic activities which has bolstered 3rd-quarter earnings of major Corporates on the NSE.

“This performance is remarkable in context of rising concerns over a 2nd wave of COVID-19 and prospects of weaker external position for the Nigerian economy. It is interesting to see that stock prices have recovered to pre-COVID-19 levels within a short duration while external conditions remain fragile. CBN is not yet out of the FX conundrum, and lower-for-long oil prices remain a key concern.

“We expect strong Naira liquidity to keep fueling equities, even as additional 1% allocation from PFAs can lift stocks higher. However, we note the market may be heating up ahead of strong rebound in the general economy.”

THE BOTTOM LINE
Low yield environment and other market conditions prevailing in the Nigerian economy have triggered significant buying interest in Nigerian stocks at record levels, despite seeming disconnection with strengthened geopolitical uncertainty and resurgent COVID-19.

SOURCE (abridged): https://nairametrics.com/2020/11/04/nigerian-stock-index-ranked-3rd-best-performing-index-globally/