Market Overview

Nigeria ETF Gets Good News on Glum Day For Global Markets

On Thursday, China sneezed, Japan caught the cold, and ETFs tracking a plethora of global markets closed lower.

Predictably, emerging markets sagged with the Vanguard MSCI Emerging Markets ETF (NYSE: VWO) and the iShares MSCI Emerging Markets Index Fund (NYSE: EEM) closing down. Developed markets offered little refuge as the iShares MSCI EAFE Index Fund (NYSE: EFA) lost about 1.5 percent.

In the sea of red of global ETFs Thursday, at least one surprising fund held up relatively well. Believe it or not, on a day when so-called traditional developed and emerging markets ETFs were being taken to task, the newly-minted Global X Nigeria Index ETF (NYSE: NGE) fell 0.9 percent. Notably, NGE's loss occurred on volume that was about 30 percent above the daily average and took the ETF to a close just pennies below its previous high. However, there was good news pertaining to the fund.

As has been noted, NGE has already shown some correlation to important news items in its less than two months of trading. However, many traders would expect the headlines that move NGE to pertain to the oil business because Nigeria, an OPEC member, is Africa's largest oil-producing nation.

That was not the case Thursday when it was banking news that jolted NGE. On Thursday, Central Bank of Nigeria Governor Lamido Sanusi said the ratio of non-performing loans at Nigerian banks to total credit plunged to 3.8 percent in April from 35 percent in November 2010, Bloomberg reported.

Unbeknownst to some investors that focus on developed markets, Nigeria experienced its own debt crisis in 2008-09. Helped by a reform-minded Sanusi, Nigerian banks have seen improvements in risk management and corporate governance, Bloomberg reported, citing the central bank chief.

That equates to good news for an ETF that allocates 41.1 percent of its weight to financial services stocks and features five banks among its top-10 holdings. Overall, NGE has 28 holdings. The ETF is up just one percent since its April 2 debut, but has surged eight percent in the past month.

For more on Nigeria, click here.

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