Lagos now well ahead of the pack

Our occasional look at three stock market indices in sub-Saharan Africa (SSA) places Lagos well ahead of both Nairobi (NSE 20) and Johannesburg (all-share). The NSEASI has gained 22.7% ytd, compared with 14.0% for Nairobi and 4.5% for Jo’burg. It was still in negative territory ytd as recently as 09 May but has since surged, driven largely by the launch by the CBN of the fx window for investors and exporters (NAFEX). A telling factor will be the imminent Q2 reporting season, for which we have high hopes (particularly for the banks).

In our excitement at this surge in little more than two months, we should not lose sight of the low trading volumes. Turnover ytd has averaged US$9.9m equivalent at the interbank rate. This compares with US$11.7m in the similar period of 2016 although we have to allow for the exchange-rate “liberalization” in mid-June. Turnover has picked up since the launch of NAFEX but from a low base.

The NSE’s latest monthly report shows that foreign participation was 46.3% of turnover in May, and 46.0% ytd. There is some evidence in the May data that domestic institutions followed offshore investors into the market.

We are at a potential watershed. If the Q2 results meet our expectations, notably for the most-traded household names, we could see buying by the large offshore investment houses which have been deterred by the workings of NAFEX.

Lagos now well ahead of the pack

We include Jo’burg because it is easily the largest bourse in SSA in terms of market capitalization. The many setbacks for investors in South Africa include uncertainty ahead of the contest for leadership of the ruling African National Congress, the appointment of a relative novice to the post of finance minister and an orchestrated attempt to challenge the autonomy of the central bank.

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