Allan Gray Ltd., which oversees $29 billion in assets, favors Nigerian stocks over South Korean equities, as they offer a diversification play from the artificial-intelligence frenzy that has swept markets from Wall Street to Asia.
Nigeria’s benchmark stock index has surged 72% in dollar terms this year, putting it on track for its biggest annual gain since 2007 and outpacing the Kospi’s 54% advance. The rally has put the market “in the same conversation” as South Korea’s Kospi Index, said Kamal Govan, a portfolio manager at Allan Gray, who runs the Cape Town-based money manager’s $604 million Africa ex SA Equity Fund.
A breakdown of the fund, which has gained 28% this year, shows Nigerian equities account for nearly a third of its holdings.
The key difference between the rallies is that the Kospi is “narrow and thematic, concentrated in two memory chip companies,” Govan wrote in a quarterly client note. Samsung Electronics and SK Hynix Inc. account for nearly half of the index and have drawn investor interest because of their exposure to the AI boom.
“Nigeria’s rally has been broad-based, spanning banks, oil and gas, telecommunications and industrial goods,” Govan said. It is “underpinned by broader fundamentals rather than a single narrative.”
Seplat Energy Plc is the fund’s biggest exposure to Nigeria’s oil and gas sector. The stock is up 197% in dollar terms this year, ranking among the 11 best performers on the 151-member index. Sterling Financial Holdings leads the pack, with shares up 1,078%.
Nigeria, Africa’s largest crude producer, has received a further boost from FTSE Russell upgrading it to frontier-market status last month. The move reverses a downgrade to unclassified status three years ago over concerns about investors’ ability to repatriate foreign currency, Govan said.
“The FTSE Russell upgrade could provide a further catalyst through increased foreign participation and improved liquidity,” he said.
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