In mid-March, the NSEASI was 10.1 percent lower year-to-date (ytd) but has since moved into positive territory. A turning point was the increase in Nigeria’s weighting in the MSCI frontier index with effect from 30 May.
Given that Lagos soared by 47.2 percent last year in local currency terms and that many valuations are already stretched, we feel that it will close 2014 little changed on the year. Nairobi (NSE 20) is flat ytd, having risen by 19.2 percent in 2013. Johannesburg, in contrast, boasts double-digit growth, having suffered more than most exchanges as a result of tapering in the US.
The performance of these three and many other exchanges has calmed in recent sessions. One explanation is that the continuation of tapering at its present pace (and its completion in Q4) is widely accepted as a given.
Choppy market conditions will return, in our view, once the leading players start to dwell at length on the timing of the first rate rise from the Fed, which consensus has in H1 2015. We continue to feel that Nigeria will escape the worst because of the strength of its external balance sheet.
New listings are the lifeblood of any exchange. In 2014, Lagos has already seen Seplat and Caverton, which should be joined by Lafarge Africa later in the year. We show Johannesburg for want of any plausible alternative in sub-Saharan Africa.
The 2013 yearbook from the African Securities Exchanges Association shows the value of shares traded in 2012 at $409bn, compared with $4.2bn in Lagos and S$1.1bn in Nairobi.
