The continuing surge of the NSEASI

Since our last look at three stock market indices in sub-Saharan Africa (SSA), the Lagos all-share index has surged further ahead of both Nairobi (NSE 20) and Johannesburg (all-share). It has gained 39.6% ytd, compared with 19.8% for Nairobi and 10.5% for Jo’burg. It was still in negative territory ytd as recently as 09 May but has since soared, driven largely by the response of the offshore portfolio community to the CBN’s new fx window for investors and exporters (NAFEX). The current Q2 reporting season has brought some strong results from non-banks.

This surge in just three months has not been a stampede. Turnover ytd has averaged just US$12.8m equivalent at the interbank rate, and US$21.5m since the watershed on 09 May.

The NSE’s latest monthly report shows that foreign participation was 46.1% of turnover in June, and 46.0% ytd. The foreign/domestic split is not radically different from 2016 and does not suggest a pattern of the offshore players taking their profits and the local institutions taking their place.

We should watch closely for the forthcoming Q2 results for the leading banks. If these perform ahead of market expectations, the surge may well have further legs. The large offshore investment houses which have been deterred by the workings of NAFEX could be persuaded to join the party.

We had expected more of a sell-off on the Nairobi market ahead of today’s elections. Opinion polls suggest that the contest between the two principal presidential candidates, both scions of Kenyan political dynasties, is very close. There is therefore the possibility of the loser crying foul and of violence in at least the main election battlegrounds in the country. This was the chain of events in 2007. The market seems to have judged that the 2010 constitutional referendum changed Kenya at election times for the better.

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