The Nigerian Stock Market is on a roll. It has gained over 12% since the start of the year and it looks like nothing will stop its momentum. This is after gaining 43% in 2017 alone.
We have put forward a theory about why the bulls are here and why they might be here for quite some time to come.
They are back and pouring 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. It is also to be noted that the global surge in equity prices across the world is also contributing significantly to demand for stock in emerging markets like Nigeria.
Crude Oil Price
Crude prices touched $70 today. Crude Oil prices have a perfect correlation with the Nigerian Stock Exchange, the All Share Index. When they rise, sentiments about the Nigerian economy is positive. for further reference, check out this chart;
Investors looking to secure their investment goals of 2018 are also pouring money into the market. As these investors invest, they create a demand for stock which in turn increases in value.
Blue Chips are gaining
Whilst the Nigerian Stock Market is recording major gains, not all stocks are actually performing. The stock 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.
It has previously been observed that treasury bill rates 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.
This article was earlier published here