Towards the floor for the NSEASI


Tuesday, January 27, 2015 12:41 PM / FBN Capital Research

The NSEASI shed 14.0% ytd through to Friday, and 13.0% in the first week of the month alone. We should view the underperformance relative to Nairobi (+2.1%) and Johannesburg (+0.1%) in the context of the oil price.

Nigeria is a leading producer in OPEC; Kenya would like to join it but the collapse of the price is set to push back the development of its promising hydrocarbons finds; and South Africa is a prime beneficiary, with consumer gains from the monthly adjustments to the retail pump price.

The fall of the index in Lagos has produced buying opportunities in both banks and non-financials although we do not see a clear recovery until investors feel that the oil price has reached its floor. FBN Capital sees a 1.0% gain for the index over the full year.

The ECB may have delivered a marginal boost last Thursday. Its monthly transfer of €60bn (US$68bn) into the Eurozone economies from the purchase of bonds with effect from March compares with US$85bn at the peak of tapering by the US Federal Reserve.

The rationale for investment remains firm household spending and the prospect of a renewed reform momentum once the electoral cycle has ended.

We have scaled down (not slashed) our growth forecast for this year to 5.3%   on this basis.

The NSE report on equity trading for November (2014) shows a 81/19 mix between foreign and domestic institutional transactions, compared with a ytd figure of 59/41. Not surprisingly, the foreign outflow of N116bn in November was far greater than the inflow of N46bn.

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