The speculative fever that gripped the Nigerian ETF market has broken, leaving double-digit losses for retail investors. As of Friday, the Stanbic IBTC ETF 30 has seen its price slashed to N3,313.18, a 52 percent wipeout from its N7,003 peak reached just nine days ago.
“ Nigerian ETFs are currently responding to the law of gravity: what goes up must surely come down. Let’s see how deep the correction will be. Still trading at a significant premium to their NAV,” Ayodeji Ebo, MD Optimus by Afrinvest, said.
Read also: ETF correction leaves latecomers in the red
BusinessDay reported just last week that investors in the Nigerian Exchange (NGX) were walking a tightrope as a structural disconnect sends Exchange Traded Funds (ETFs) soaring to over 100 percent returns, despite the underlying stocks/ indexes performing much lower.
While the ETF was in free-fall, the underlying NGX 30 Index actually hit a new record high of 7,036.83 points yesterday. This divergence confirms that the forces that initially lifted ETF prices have now turned into a whirlpool, dragging down funds that were trading at unsustainable premiums.
The carnage is widespread across the sector as price discovery finally returns to the bourse.
The SIAML ETF 40 has retreated to N8,492.85, losing nearly half its value from the February 12 high of N15,899, while the Meristem Growth and Value ETFs have shed approximately 34 percent and 23 percent, respectively, in the same period.
Read also:Are retail investors buying into the ETF liquidity trap?
Even safer havens have not been immune; the Vetiva S&P Nigeria Sovereign Bond ETF, once trading as high as N900, has tumbled to N498.30.
In the middle of this week’s valuation reset, a few ETFs managed to go against the downward trend. Unlike the index trackers that hit the liquidity wall, these performers were driven by a flight to safety and sector-specific tailwinds.
In contrast to the broader sell-off, the Greenwich Alpha ETF and Vetiva Banking ETF showed notable resilience, as the former edged up to N900 while the latter held firm at N30, from N200 and N14.5, respectively.
The NewGold ETF was the standout performer this week, rising from N79,999 to N82,500. Its success is rooted in its structure; unlike equity ETFs that track local stocks, NewGold tracks the global spot price of gold. Additionally, because gold is priced in dollars, the fund benefited from the rising global bullion prices and a hedge against local currency volatility.
Read also:Nigeria’s ETF market: Are retail investors buying into massive liquidity trap?
Geopolitical tension, Feds decision drove the yellow metal closer to a weekly close at $5100/oz.
