Nigerian Stocks Outpace South Korea in Diversification Shift

Asset manager Allan Gray Ltd. is favoring Nigerian stocks over South Korean equities to escape the global artificial-intelligence frenzy. Allan Gray manages $29 billion in assets. Nigeria's benchmark stock index has surged 72 percent in dollar terms this year, putting it on track for its biggest annual gain since 2007. This growth outpaces the Kospi index's 54 percent advance. Kamal Govan, a portfolio manager at Allan Gray who runs the firm's $604 million Africa ex SA Equity Fund, stated that the Nigerian market is now in the same conversation as South Korea's Kospi Index. The fund itself has gained 28 percent this year, with Nigerian equities making up nearly a third of its holdings.

Market Rallies

The South Korean Kospi rally is narrow and thematic, concentrated in two memory chip companies. Samsung Electronics and SK Hynix Inc. account for nearly half of the index due to their exposure to the artificial intelligence boom. In contrast, the Nigerian rally is broad-based, spanning banks, oil and gas, telecommunications, and industrial goods. Govan noted that this growth is supported by wider fundamentals rather than a single narrative. Seplat Energy Plc serves as the fund's biggest exposure to the Nigerian oil and gas sector. The stock is up 197 percent in dollar terms this year, placing it among the 11 best performers on the 151-member index. Meanwhile, Sterling Financial Holdings leads the entire pack with shares up 1,078 percent.

Context

Nigeria holds the position of Africa's largest crude producer. The country recently received a boost when FTSE Russell upgraded it to frontier-market status, reversing a downgrade from three years ago that stemmed from foreign currency repatriation concerns. Fund managers view such upgrades as a way to increase foreign participation and improve market liquidity.