Nigeria ETF Surges as Local Investors Turned to Equity Market | ETF Trends

The Nigeria related ETF climbed Thursday after local investors were barred from a treasury auction and turned to shares instead, fueling a rally in banking stocks.

The Global X Nigeria Index ETF (NYSArca: NGE) was up 5.0% Thursday, trading on close to seven times its averaged daily volume and breaking above its short-term resistance at the 50-day simple moving average.

Local Nigerian investors shifted over to the equity markets, notably more liquid banking shares, after being shut out of a treasury auction, pushing the market to a five-week high on Thursday, Reuters reports.

The financial sector makes up the lion’s share of NGE’s underlying portfolio, accounting for 46.2% of holdings, followed by 25.8% consumer staples, 14.8%, materials, 8.5% communication services, 2.8% utilities and 2.0% energy. Top holdings include financial sector names like Guaranty Trust Bank 12.7%, Access Bank 7.1%, United Bank 5.1% and FBN Holdings 5.1%.

Access Bank jumped 9.6% and was up 43% for the year. FBN Holding, FCMB, Wema Bank, each rose over 9% as well.

The central bank last month barred local investors from taking part in its Treasury bill auctions in an attempt to attract greater foreign interest as a way to strengthen dollar liquidity and bolster the naira currency. On Thursday, the central bank auctioned 300 billion naira in open market securities.

However, since local investors were unable to participate in the sale, the second instance since the ban was introduced, they looked to alternative investment sources to put their money to work.

One fund manager, who revealed he had holding more in cash and bank deposits since the central bank’s announcement, believed that the treasury auction ban should soon be relaxed as the excess liquidity affects markets.

For more information on the developing economies, visit our emerging markets category.