As concerns mount over the sustainability of artificial intelligence demand, investors are continuing to withdraw funds from the South Korean market, pushing its previously world-leading stock exchange into a technical bear market. Meanwhile, Nigeria's stock market has surged ahead, becoming the top-performing global market in terms of US dollar returns this year.
According to data from 92 global stock exchanges compiled by Bloomberg, the benchmark index of Africa's largest oil producer, Nigeria, has delivered a total US dollar return of 68% year-to-date, surpassing the 66% gain of South Korea's KOSPI index.
The data shows that as of July 9th, the top global markets by US dollar total return this year are as follows: Nigeria at 68%, South Korea at 66%, Ghana at 57%, and Taiwan, China at 54%.
The South Korean KOSPI index entered a technical bear market this week, having fallen 22% from its peak on June 19th. Investors are reassessing whether demand for AI-related stocks can be sustained, leading to capital outflows from the South Korean market. So far this year, the South Korean won has depreciated by nearly 5%, making it the fourth-worst performing currency in Asia.
In contrast, Nigeria's stock market has continued its ascent, driven by economic reforms, rising international oil prices, and improved foreign exchange supply. The Nigerian naira has appreciated by 4% since January. Furthermore, news this week that S&P Dow Jones Indices is considering reclassifying Nigeria as a frontier market could further enhance the market's appeal to international investors.
Arnold Dublin-Green, Managing Director at RC Asset Management, stated that global institutional capital is re-evaluating Nigeria. This is reflected in the potential inclusion of its assets in more international indices and the market's growing recognition of the country's economic reforms in recent years.
"We must remember that Nigeria started from a very low base, and these were the very issues that led to its downgrade. The situation is now improving," he noted.
He further pointed out, "The rally in Asian markets follows a completely different logic; it has been almost entirely driven by a single theme, fueled by the earnings of companies like SK Hynix Inc, Samsung Electronics Co Ltd, and Taiwan Semiconductor Manufacturing Co Ltd."
The rally in Nigeria's stock market this year has been primarily led by the financial services sector. Among individual stocks, Fortis Global Insurance Plc stands out with a staggering US dollar return of 1,483%, making it the top performer.
Unlike the South Korean KOSPI, Nigerian listed companies have little direct involvement in the artificial intelligence industry. Damilola Okeleye, a trader at Stonex Nigeria Financial in Lagos, explained that the factors driving capital into Nigerian stocks are not AI, but broader improvements in economic fundamentals.
He stated that Nigeria's ongoing economic reforms, along with the potential future listing of Africa's largest crude oil processing company, Dangote Petroleum Refinery and Petrochemicals FZE, are significant drivers behind the country's sustained stock market gains this year.
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