The NSEASI Still on a Roll


Tuesday, October 10, 2017/ 9:58 AM /FBNCapital Research


Since our last look at three stock market indices in sub- Saharan Africa (SSA), the Lagos all-share has continued to outperform both Nairobi (NSE 20) and Johannesburg (allshare). In local currency terms it has gained 37.1% ytd, compared with 16.5% for Nairobi and 13.0% for Jo’burg. It was still in negative territory ytd in early May but has surged, driven largely by the offshore investor response to the fx window for investors and exporters (NAFEX). The Q2 reporting season also brought some strong results from leading banks and non-banks.


This surge in five months has not been a stampede. Turnover ytd has averaged just US$12.2m equivalent at the interbank rate, and US$18.2m since the watershed on 09 May. The trend is downward. Foreign investors’ share of transactions ytd is little changed from 2016. NSE data does show, however, that they committed N123bn (net) to the market in August.


The NSE has benefited from a “sweet spot”. The oil price is off the floor, reserves accumulation has been impressive and the FGN has made some positive steps on deficit financing. Longer term structural reforms have been slow in coming.

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These markets and others tend to react to major political events, rather than form a view on them in advance. Nairobi barely flinched ahead of the elections held on 08 August. The judiciary then took the unprecedented step of ordering a re-run of the presidential polls, which have been scheduled for 26 October. Neither candidate accepts the possibility of losing the new election. Some depressing scenarios have arisen.


Similarly, the JSE has steadily firmed despite the unfolding drama around Bell Pottinger, McKinsey and KPMG. In December the ruling ANC is to vote on a new leader (effectively its presidential candidate post-Zuma). Perhaps investors are convinced that the outcome will be market-friendly.


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