Macro doubts and the slide on the NSE


Thursday, December 04, 2014 2:00 PM / FBN Capital Research


Since January the NSEASI has been the laggard of the three stock market indices in Africa we intermittently track but its relative underperformance vs Nairobi and Jo’burg has fallen to new depths. It was last in positive territory ytd on 01 September and shed 8.0% in the month of October alone.


The index’s ytd decline of 18.8% compares with gains of 4.9% and 7.2% for Nairobi and Jo’burg respectively. These movements are all expressed in local currency terms.  All three took a hit from the start of tapering by the US Federal Reserve in Q1.


Nigeria’s greater woes can be traced to the correlated declines in the crude oil price and the naira exchange rate. The impact is felt in different ways on the listed banks and consumer goods companies, let alone the small oil and gas segment of the market.


Reforms on the exchange such as the launch of securities lending, the development of seamless market-making and another review of the fee structure would all be helpful. Yet a convincing bull run requires investor confidence that the macro story is turning for the better.


The NSE saw three sizeable listings earlier this year (Seplat, Caverton Offshore and Lafarge Africa), and enjoyed a short-lived boost in late May from an increase in the Nigeria country weighting in the MSCI frontier index. In current market conditions, however, we do not expect to see any further entrants, and suspect that planned rights issues could be delayed too.

The NSE report on equity trading for October (2014) shows total foreign transactions of N153bn, equivalent to 88% of all transactions.


The share was the highest of the year, with foreign outflows in the month close to twice the level of inflows. There has been a net foreign outflow ytd of N101bn. 

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