Global X Nigeria Index ETF: Bargain Shoppers Pay A Visit

I have been waiting since September, 2018 for the next opportunity to buy back into Nigeria through the Global X Nigeria Index ETF (NGE). The moment for me to buy is finally here.

The Global X Nigeria Index ETF (NGE) confirmed a 200DMA breakout with a gap up and 3.7% gain.
The Global X Nigeria Index ETF (NGE) confirmed a 200DMA breakout with a gap up and 3.7% gain.

NGE has printed all the encouraging signs of a tradeable bottom:

  • A double bottom: August to October, 2019 at the all-time lows.
  • A breakout above the 50-day moving average (DMA) in November confirmed by a successful test of 50DMA support in December.
  • A 50DMA turning upward after a long downtrend.
  • A breakout above the 200DMA confirmed by a gap up on high trading volume.
  • High trading volume on up days

The Global X Nigeria Index ETF (NGE) is a highly concentrated bet on Nigeria. The ETF’s top 10 holdings constitute 71.4% of assets. Seven of those 10 holdings are banks. The other three are Nestle Nigeria PLC (12.3%), Dangote Cement (11.1%), and Nigerian Breweries (5.4%). Financials, construction, and consumer goods are major players in the economy beyond oil companies, so I interpret the developing turn-around in NGE as a vote of confidence in broader economic health.

At a time when major indices like the S&P 500 (SPY) are making all-time highs, bargain shoppers are pacing up and down the aisles for discounts. Nigeria represents a major bargain: all the political and economic trials on the surface make Nigeria look unattractive. However, as Africa’s most populous country, opportunity abounds. With a stabilizing currency, the niara, the opportunity looks as good as ever in NGE even with a world awash in so much oil that the commodity cannot hold a rally on bad geo-political news.

The United States Oil Fund (USO) lost 3.6% as oil prices plunged with relief after Iran's missile attack on U.S. bases in Iraq did not produce an escalation of war.
The United States Oil Fund (USO) lost 3.6% as oil prices plunged with relief after Iran’s missile attack on U.S. bases in Iraq did not produce an escalation of war.
Source for charts: FreeStockCharts

The Trade

I think NGE could easily get away from me here, so I will immediately buy a “no regret” position where I buy a small amount of shares to make sure I can participate in a runaway rally. If NGE pulls back, I will load up to a full position. My preferred entry point is on a retest of 200DMA support.

With NGE on the rebound, I am also incrementally more confident in doubling down on Jumia (JMIA) with its own breakout from all-time lows.

Be careful out there!

Full disclosure: long JMIA

3 thoughts on “Global X Nigeria Index ETF: Bargain Shoppers Pay A Visit

  1. A better time to buy was two weeks ago. NGE is up more than 11% in two weeks. For me it’s too risky to buy something that is up so much in such a short time.

  2. I would definitely have preferred to buy even lower, but my perspective is that NGE is “at risk” of soaring on momentum. So I bought a small amount of shares to make sure I have something in play in that scenario. Otherwise, I will definitely buy a lot more at a discount. Also recall my perspective is of someone who last sold at much higher prices.

  3. Eric, any reason why the NGE is suddenly up 11%, no great news coming from the Nigerian economy, while it’s been predicted Emerging Markets will outperform major markets, I don’t see it happening with the NGE, unless one goes short

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