Nigerian equities have overtaken South Korea's to hand investors the highest dollar-based returns this year, as souring sentiment on artificial-intelligence stocks pushes the Asian nation's world-beating rally into bear territory.
The benchmark index in Africa's largest oil producer has returned 68% in dollar terms this year, outpacing the 66% gain for the Kospi index, according to data from the 92 global stock exchanges tracked by Bloomberg.
| The Kospi index fell into a technical bear market this week, after shedding 22% since its June 19 peak, as investors pull out of the Asian nation's equity market on renewed questions about whether demand for AI stocks is sustainable. The South Korean won has weakened almost 5% year-to-date and is the fourth-worst performing Asian currency. In contrast, Nigerian stocks have rallied on economic reforms, higher oil prices and better foreign-exchange supply, with the naira gaining 4% since January. News this week that S&P Dow Jones Indices is considering upgrading the country to frontier-market status may add to its investor appeal. ALSO READ: IT Stocks Rally: Infosys, LTM, Tech Mahindra Shares Jump Over 4% After TCS Q1 Meets Estimates Nigeria is undergoing a "re-rating" by global capital institutions with this reflected by its assets being considered for possible index inclusions and its years-long reforms getting priced in, according to Arnold Dublin-Green, managing director at RC Asset Management Ltd., a unit of Renaissance Capital Africa. "Remember the country is coming from a low base and these are the issues that got Nigeria demoted in the first place," the Lagos-based fund manager said. The "Asian rally is a completely different animal, its a single theme and earnings driven trade from SK Hynix, Samsung and TSMC," he said. Nigeria's gains have been led by financial services companies, with Fortis Global Insurance Plc delivering a 1,483% return in dollar terms. Unlike the Kospi, companies listed on Nigeria's stock exchange aren't directly exposed to AI. Investors piling into equities in the West African nation are attracted by other factors, according to Damilola Okeleye, a Lagos-based trader at Stonex Nigeria Financial Ltd. ALSO READ: From Critic To Admirer? Elon Musk Praises Anthropic's Mythos, Fable; Calls It 'Leader In AI' Nigeria's economic reforms and the potential listing of the continent's largest crude-processor, Dangote Petroleum Refinery and Petrochemicals Fze, have been "a strong driving force to the gains seen year to date," Okeleye said. |
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