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Monday, March 27, 2023

Lagos Bourse Emerges Africa’s Top Stock Market as Rally Intensifies

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The Lagos bourse has emerged as Africa’s best performing stock exchange following significant rallies recorded in the past few days.

Investors are interested in Nigeria’s cheap stocks after a long period of apathy towards the equity market.

The Nigerian Stock Exchange (NSE) has seen year to date (YTD) returns of +7.70 percent, as of October 6TH, which compares with Ghana (-17.7%), South Africa (-4.7%), and Kenya (-15.8%), according to data gathered by United Capital Limited.

The rally that has seen stocks return to pre Covid-19 levels was driven by the low rate environment and the dovish stance of the central bank that cut interest during the last Monetary Committee Meetings (MPC), analysts say.

On September 22 the Apex bank surprised the market when it lowered the monetary policy rate (MPR) to 11.5 percent from 12.5 percent, citing the need to curb looming recession amid a precipitous drop in oil price.

The second quarter GDP report by the National Bureau of Statistics (NBS) showed the economy contracted by 6.10 percent in the first three months through June from a year earlier, compared with growth of 1.87 percent in the previous quarter.

Investors have come to the realization that the fixed income market has become unattractive since they are no longer getting interest rates above the inflation rate.

Every investor is always looking to put their money and earn high returns.

Analysts say the real interest rate is positive for most Africa countries, which means they earn a higher real rate of returns.

However, real interest rate is negative for Nigeria as inflation continues to undermine asset prices and erode consumer purchasing power.

“This month, we expect that the positive sentiment in the equities market will be sustained as investors’ position for Q3-2020 earnings publications,” said analysts at United Capital Limited.



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