A Stellar Performance by Lagos in 2020


Tuesday, January 12, 2021 / 09:56 AM / by FBNQuest Research / Header Image Credit: The Nigerian Stock Exchange

Proshare Nigeria Pvt. Ltd.

The stock market in Lagos outshone both Nairobi (NSE20) and Jo'burg (all-share) by a wide margin in 2020, gaining 50.0% over the full year. When we note that the NSEASI was still in negative territory ytd as late as 30 September, then the surge becomes remarkable. The best performer of the sector-based indices over the year was 90.8% for industrial goods, which was driven by listed cement companies. Unsurprisingly, the worst performer was the oil and gas segment. The reason for this stellar performance by Lagos was changes in asset allocation by domestic investors: they accounted for 65.3% of transactions by value in January-November according to the NSE's own data, compared with 51.2% in the comparable period in 2019.


Returns on FGN paper, the NTBs most of all, crashed last year, leading domestic players to revisit the stock market. Our assumption is that Pencomm's monthly reports for October and November on the assets under management (AUM) of the PFAs will bear out this explanation. The share of equities in total AUM was just 5.1% at end-September.


Retail is an important element of the domestic investor base alongside the institutions, representing 45.0% of domestic transactions in January-November.


Foreign portfolio investors (FPIs) have been bystanders during the surge, the focus for the majority being navigating the pipeline of delayed external payments and making an exit.


In EM they are generally chasing good GDP and household consumption growth as well as market-friendly reforms. Other than possibly Kenya, they are looking in vain. They are also drawn to new issues: the NSE can point to its gradual steps toward its own demutualisation (and thereby joining its Nairobi counterpart).


For many FPIs, an IMF programme in operation underpins said good policy. None of the three governments has such currently in place beyond the condition-free credits to support economic resilience in the face of the virus. The FGN has only ever signed four arrangements with the IMF, and never drawn down funds. The last South African arrangement with the Fund predates majority rule. Kenya will probably be the next  to sign up (and draw down tranches).


The African bourse of choice for FPIs remains Egypt, which has an IMF arrangement, and further afield they favour Vietnam, Bangladesh and the Philippines.


Performance of three SSA market indices, 2020 (% chg ytd; local currency units)

Proshare Nigeria Pvt. Ltd.

Sources: Nigerian Stock Exchange; Nairobi Stock Exchange; Bloomberg;  FBNQuest Capital Research


Proshare Nigeria Pvt. Ltd.

Related News

  1. Lagos the Leader of the Pack for Equities
  2. Lean NSE Stock Prices of Companies Listed in 2009 Raise Investor Concern; Analysts Keep Watch
  3. NSE All Shares Index: Dissecting The Highs and Lows
  4. NSEASI Closes Above 35,000bpts, Inches Up by 6.23% as Circuit Breaker Triggers
  5. NSEASI Closes Above 33,000bpts, Hits 24-Month High as CAP Records N324.63bn Gain
  6. NSE Delists Law Union and Rock Insurance Plc from Its Daily Official List
  7. NSE Back Above Water, Nairobi Still in Difficulties
  8. Equities: Surge in Buying Interest Drives Bullish Bourse
  9. Stockbrokers to Set Blueprint for Economic Revival
  10. A Tidal Wave That Passed The NSE By
  11. Nigerian Equity Market Outlook: COVID Out, Riots In?
  12. PDF: Parable of the Monkey Market
  13. The End of the IPO as we Know It - OpEd


Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Related News