The Nigerian Stock Market is on a roll. It has gained over 12% since the start of the year and is looking like nothing will stop its momentum. This is after gaining 43% in 2017 alone.
We have a theory of why the bulls are here and why they might be here for quite some time.
Foreign Investors
They are back and pouring in cash into equities. According to sources, most of the fund managers who missed out in the Nigerian stock market rally of 2017 are rushing in to buy stocks, which are still relatively cheap. Also to note that the global surge in equity prices across the world is also contributing significantly to demand of stocks in emerging markets like Nigeria.
Crude Oil Price
Crude prices touched $70 today. Crude Oil prices has a perfect correlation with the Nigerian Stock Exchange All Share Index. When they rise, sentiments about the Nigerian economy is positive. In case you are doubting, check out this chart;
January Fever
Investors looking to secure their investment goals of 2018 are also pouring in money into the market. As they invest, they create demand for stocks which in turn increases the value.
Blue Chips are gaining
Whilst the Nigerian Stock Market is recording major gains, not all stocks are actually performing. The market is doing very well because a few of the most capitalized stocks (which are also called Blue Chip stocks) have been recording massive gains. For example, Dangote Cement, Nigeria Breweries, Nestle, Zenith, GTB, Unilever, FBNH, Seplat have all gained significantly.
Interest rates
Recall, we reported that treasury bills rate have been dropping. As fixed income securities yield drop, investors gravitate towards the stock market in search of yield. This has also contributed significantly to the gains being recorded in the stock market.
