By Omoh Gabriel, Business Editor
The Nigerian Stock market recovery was last week tagged the top among smaller emerging markets raising hope that those who lost money through share purchases during the global financial crisis have a chance of recovery their loses at the Nigeria stock Exchange this year if they have not sold their shares at give away prices.
A research conducted by Fund Managers in Europe and published by Bloomberg said that Stocks in the smallest emerging markets are beating their larger peers by the most in almost five years and Templeton Asset Management Ltd.â€™s Mark Mobius says they will keep rallying as consumer demand picks up. The Nigeria Stock Market was named as one of such top performer
â€œGiven their gains, I would not say that we are finding screaming value in some of these markets now,â€ said Hugh Young, who counts shares in Sri Lanka, Pakistan and Nigeria among the $232 billion of assets he helps to manage as head of equities at Aberdeen Asset Management Plc in Singapore.
The Nigerian capital market has grown by 33.26 per cent from the commencement of trading in 2010 till date (April 8, 2010), as investors enjoyed N1.66 trillion improvement on their investments at the Nigerian Stock Exchange.
In particular, analyses in the period under review, shows that the key performance indices, the All-share index and market capitalisation, both rose within the period by 32 per cent and 33 per cent respectively a record achievement by international bench mark. The capitalisation shot up to N6.649 trillion from N4.989 trillion recorded as at the open of trading in the year, while the index garnered 6,662.55 basis points to 27,489.72 points from 20,827.17 points.
Also significant improvement was recorded in all the major sectorial indices and blue chip index â€” the NSE 30 index. The NSE Food/Beverage index appreciated by 52.8 per cent to 804.78 points from 526.71 points at which it opened in the period under review, the NSE Banking index rose by 35.81 per cent to 460.82 points from 339.32 points, NSE Oil/Gas index garnered 11.5 per cent to 321.15 points from 288.06 points at which it opened, while the NSE 30 index appreciated by 33.45 per cent to 1,104.93 points from 827.99 points at which it opened trading for the year.
Companies in the NSE 30 which shares are appreciating fast include First Bank of Nigeria Plc, Zenith Bank Plc, Nigerian Breweries Plc, GTBank Plc, United Bank for Africa Plc, Oando Plc, African Petroleum Plc, Diamond Bank Plc, Honeywell Flour Mills Plc, Dangote Flour Mills Plc, Ecobank Nigeria Plc, among others.
Banks that make up the NSE Banking index include: First Bank of Nigeria Plc, Zenith Bank Plc, Diamond Bank Plc and Ecobank Nigeria Plc, United Bank for Africa Plc, GTBank Plc among others.
The NSE Insurance index is composed of Unity Kapital Assurance Plc, Guaranty Trust Assurance Plc, African Alliance Plc among others.
Companies that make up the NSE Food, Beverages & Tobacco index are Honeywell Flour Mills Plc, Northern Nigeria Flour Mills Plc, Dangote Flour Mills Plc, Dangote Sugar Refinery Plc among others.
The NSE Oil/Gas index is composed of Oando Plc, African Petroleum Plc among others.According to the research findings of the fund managers, â€œdeveloping-nation money managers have been increasing their allocation to frontier markets,â€ said Brad Durham, managing director of Cambridge, Massachusetts_based researcher, EPFR Global. Funds tracking the smallest developing nations have drawn about $269 million this year after outflows of $249 million the same period a year earlier, EPFR data show. Mobius, the Singapore_based executive chairman of Templeton Asset Management said about 10 per cent of his holdings are in frontier nations and that Nigeria, Africaâ€™s biggest oil producer, is among the most attractive markets.
â€œFrontier markets in general are quite exciting,â€ Mobius said. â€œThe valuations are still interesting in those markets.â€ Nigerian Breweries Plc, the countryâ€™s biggest brewer, was ranked among the 10 largest holdings in Templetonâ€™s Frontier Markets Fund as of December 31. The Lagos_based company reported a 9 per cent gain in 2009 profit, and the shares have risen about 17 per cent this year.
â€œMarkets are back on the boil,â€ said Arjuna Mahendran, Singapore_based investment strategist at HSBCâ€™s private bank unit, which oversaw total client assets of about $460 billion as of DecemberÂ 31. â€œBut weâ€™re nowhere near the exuberance that is associated with an impending crash.â€Â The MSCI Frontier Markets Index rose 11 per cent this year, outpacing the MSCI Emerging Markets Index by 9 percentage points, the widest gap since the second quarter of 2005. The gauge of shares from Ukraine to Kenya and Vietnam trades for 1.5 times net assets, a 29 per cent discount to the MSCI emerging index, which is dominated by Brazil, Russia, India and China.
Frontier markets are outperforming even as analysts cut â€œbuyâ€ ratings this year in 10 of 14 countries forecast earnings will trail those in the so_called BRIC nations. The estimates ignore the boost to profits from rising commodities and consumer demand in the smaller markets, making them among the best â€œcontrarianâ€ bets, said Mobius, who oversees about $34 billion in developing nations.
â€œWe may go into an era where the small markets are going to steal the show,â€ said Antoine van Agtmael, who coined the term â€œemerging marketsâ€ in 1981 and now oversees about $13 billion at Emerging Markets Management LLC in Arlington, Virginia. â€œThey have not been fully discovered but are very interesting, quite attractively priced and show a lot of promise.â€
The emerging_market gauge climbed 1.2 per cent to 1,022.72 as of 7:49 a.m. in New York. Among frontier markets, Vietnamâ€™s VN Index advanced 1.8 per cent while Romaniaâ€™s BET Index gained 1.7 per cent and Nigeriaâ€™s All-Share-Index rose 1.2 per cent. Ukraineâ€™s PFTS Index fell 2.3 per cent.
Consumer goods companies in the MSCI frontier index are projected to increase operating profits at a 20 per cent pace for the next five years, compared with 18 per cent for companies in the MSCI emerging gauge and 13 per cent for those in the MSCI World Index of advanced nations.
The MSCI frontier gauge gained 60 per cent from a 5 1/2_year low in March 2009 as governments committed about $12 trillion to revive the global economy and developing_nation borrowing costs dropped to below their level before New York_based Lehman Brothers Holdings Inc. declared bankruptcy in September 2008. Countries represented in MSCIâ€™s frontier gauge are poised to grow about 2.5 per cent on average in 2010, according to estimates from the Washington_based International Monetary Fund.
Ukraineâ€™s PFTS Index has climbed 64 per cent this year, the best rally among 93 stock benchmark measures tracked by Bloomberg, after a new government led by President Viktor Yanukovych pledged to resume cooperation with the IMF on a $16.4 billion loan package frozen since November. Interpipe, a Ukrainian maker of metal pipes, and steel company, Mariupolsky Metallurgical Plant both soared more than 60 per cent.
The largest emerging markets trailed this yearâ€™s rally in developing_nation stocks on concern rising inflation will force central banks to raise interest rates. The Shanghai Composite Index sank 5.1 per cent as China lifted bank reserve requirements twice and economists in a Bloomberg survey said the central bank may raise interest rates this month.
The Reserve Bank of India unexpectedly raised interest rates last month for the first time in almost two years, while traders are betting Brazilâ€™s central bank will boost borrowing costs by at least 50 basis points at its next policy meeting, April 28. The Bombay Stock Exchange Sensitive Index gained 0.4 per cent in 2010, while the Bovespa index climbed 2.1 per cent. Russiaâ€™s Micex index is up 5.9 per cent.
The out-performance of frontier markets is making analysts less optimistic. They cut buy ratings on shares in Romania to 37.6 per cent of the total last month, the lowest level since Bloomberg began tracking at least 20 ratings in the country in July 2005. Recommendations in Kenya, Kuwait, Oman and Bahrain also sank to record lows, Bloomberg data show.