Nigerian stocks surged the most in more than five years on Thursday and triggered a market-wide circuit breaker for the first time as traders bought up shares in a hunt for assets with attractive yields.
The Nigerian Stock Exchange All Share Index jumped by 6.2%, its steepest increase since April 2015. As the gains in the benchmark index raced beyond 5%, an automatic 30-minute trading halt was activated for the first time since its introduction in 2016, the exchange said in a statement.
The Lagos market was the best performing globally on the day among 93 benchmarks tracked by Bloomberg, and its 32% advance in 2020 is the strongest of any major equities gauge. Dangote Cement Plc contributed most to Thursday’s gains, advancing 8.1%, followed by BUA Cement Plc and Airtel Africa Plc, which both soared by the maximum 10% allowed by the bourse.
A persistent slide in short-term interest rates offered on government treasury bills is pushing traders toward equities, said Tajudeen Ibrahim, an analyst at Chapel Hill Denham in Lagos. Sentiment behind the five-day rally in Nigerian stocks has also been supported by progress in the search for a Covid-19 vaccine and the outcome of the US presidential election.
The recent gains have triggered a technical signal that the market may be overbought. The 14-day relative strength index on the Lagos equities benchmark has climbed above 96, well beyond the level of 70 that signals to some analysts that the gauge may have risen too far, too quickly and could be poised for a pull-back.