Nigeria’s benchmark stock index rallied in its best six-day gain since 1998 as local investors sought bargains following the gauge’s drop to the lowest in almost two years, reports Bloomberg.
The Nigeria Stock Exchange All Share Index climbed 0.7 percent by the close in Lagos, the commercial capital, extending its advance since December 18 to 20 percent and trimming its drop this year to 16 percent. Guinness Nigeria Plc, the local brewing unit of Diageo Plc, climbed to its highest level in more than a month, while Nestle Nigeria Plc rose 7 percent.
Foreign investors sold Nigerian stocks as the price of crude dropped into a bear market and on concern that measures the country’s central bank put in place to stem capital outflows would hinder their ability to sell holdings in Africa’s top oil producer. The lower stock prices are opportunities for domestic buyers, according to Abiola Rasaq, a research analyst at Lagos-based Associated Discount House Ltd.
“The bargain hunting is done largely by the local investors who see opportunities to buy into these stocks,” he said by phone on Monday. “Foreign investors are being very careful because they are not clear about what regulations may come up.”
The Central Bank of Nigeria (CBN) said earlier this month that lenders must clear positions daily after previously being allowed a net-open position of 1 percent of shareholder funds. It also ordered dollars bought from banks by foreign-currency dealers to be used within 48 hours or sold back to the regulator.
Trading in the naira on the interbank market was limited on Monday due to the central bank policies, said Rasaq. There were 16 trades since 10 a.m., according to data compiled by Bloomberg. The currency was down 0.3 percent to 182.50 per dollar.
Guinness Nigeria rose 5 percent to N159.45, the sixth day of gains. The country’s Nestle unit advanced to N995, the highest in two months.
“The collapse in the stock market in the fourth quarter had resulted in much cheaper valuations, so it is likely that selected market players took advantage,” Samir Gadio, head of Africa strategy at Standard Chartered Plc in London, said by e-mail. “It remains to be seen if these gains can be sustained given the lower oil price and risk aversion towards Nigeria’s tradable assets at the moment.”
Source : BusinessDay