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By Chijioke Ohuocha
LAGOS, June 2 (Reuters) - Nigerian stocks surged to a 4-month high on Monday after equity index provider MSCI increased the weight of Africa’s biggest economy in its frontier market index.
MSCI increased the weight in the index to 19 percent, from 12 percent, making it the second biggest after Kuwait.
It added oil firm Forte Oil and pan-African lender Ecobank. Forte surged the maximum allowed 10 percent. Ecobank added 6.85 percent
Listing in such indexes brings in investors who track them.
Nigeria is struggling with a weak currency and beset by political risk over upcoming elections and the abduction of over 200 schoolgirls by Islamist group Boko Haram. Its stock market is flat on the year to date in dollar terms.
“We are seeing increased buying activities from foreign investors. The market reacted positively on the back of the index news,” said Akinbamidele Akintola, vice president, Africa equity sales at Renaissance Capital.
Nigerian stocks rallied 3 percent on Friday ahead of the rejig and rose again on Monday to hit four-month highs. The index of Nigeria’s top five oil and gas firms climbed 7.15 percent, helping the index rise above 40,000 points, a level last seen in January.
Average traded volumes hit $72 million on Friday, compared with an overall average of between $20 million to $30 million this year, Renaissance Capital’s Akintola said.
A youthful population, high economic growth rate and an expanding middle class have drawn investors to frontier markets in recent years, leading them to significantly outperform emerging and developed markets in terms of returns.
Foreign portfolio inflows into Nigeria’s equity market rose 65.1 percent to 356.50 billion naira ($2.20 billion) in the first quarter as domestic investors reduced their exposure.. (Additional reporting by Oludare Mayowa Editing by Jeremy Gaunt)