RECAP & OUTLOOK: Nigeria stock market Gains N1.043trn in Week 51

RECAP & OUTLOOK: Nigerian stock market Gain N1.043trn in Week  51

• As market cap surpassed N20trn
• Weekly trade value swells by 128%
• Analysts forecast sustained uptrend, price correction, expatriates’ return

As the year 2020 winds down with less than a week to close the year, the Nigerian stock market has further posted positive record to close the penultimate week of the year with N1.043 trillion profit.

Last week which is the 51^st week of the year, investors flocked into the shares of Dangote Cement following the announcement of its much-awaited share buyback programme.

Based on the preceding, the local bourse received a boost as the All-share Index (ASI) rose by 5.4 per cent week on week (w/w), the second consecutive weekly gains to closed at 38,800.01 basis points, the highest level since 28 May 2018.

NSE’s Trading floor

Similarly, the monetary valuation of equity investment in the country’s capital market hit N20.279 trillion on the back of the N1.043 trillion gain within the four-day trading week.

Although, foreign investor interest in AIRTELAFRI (+10.0 per cent) dissipated compared to the prior week (+21.0 per cent), bargain hunting in DANGCEM (+17.0 per cent), BUACEMENT (+9.1 per cent), and FLOURMILLS (+7.5 per cent) buoyed market performance.

Accordingly, month-to-date (MtD) return rose to 10.7 per cent while the YTD return for index improved to 44.55 per cent, which is now ahead of the 42.3 per cent gain recorded in 2017.

Performance across sectors was broadly positive. Save for the Banking index that slid by 1.0 per cent, the Industrial (+12.1 per cent), Insurance (+6.0 per cent), Oil and Gas (+1.4 per cent), and Consumer Goods (+0.3 per cent) indices closed in the green.

Turnover on the high side

As investors flooded the market, market turnover for the week advanced significantly as traded volume and value soared by 45.59 per cent and 128.43 per cent respectively.

Specifically, a total turnover of 2.756 billion shares worth N40.311 billion in 17,459 deals were traded during the week in contrast to a total of 1.893 billion shares valued at N17.647 billion that exchanged hands previously in 20,660 deals.

The Financial Services Industry (measured by volume) led the activity chart with 2.106 billion shares valued at N19.454 billion traded in 8,327 deals; thus contributing 76.40  per cent and 48.26 per cent to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 182.099 million shares worth N4.392 billion in 2,485 deals, while the third place was Industrial Goods Industry, with a turnover of 145.808 million shares worth N10.632 billion in 2,587 deals.

In terms of volume, trading in the top three equities namely Access Bank Plc, Zenith Bank Plc and AXA Mansard Insurance Plc, accounted for 1.439 billion shares worth N13.881 billion in 2,972 deals, contributing 52.23 per cent and 34.44 per cent to the total equity turnover volume and value respectively.

Meanwhile, a total of 645,669 units of exchange traded products valued at N2.009 billion were traded in the week in 33 deals compared with a total of 412,358 units valued at N1.396 billion transacted the previous week in 40 deals.

However, there was a loss of momentum in the bond segment of the market as investors traded a total of 488 units valued at N499,807.41 in 11 deals compared with a total of 47,699 units valued at N53.129 million transacted during the preceding week in 22 deals.

Analyst’s remarks       

Analysts at Cordros Capital Limited remarked that, as the year draws to a close, “we expect yield-seeking investors to take positions in stocks with attractive dividend yields, in the face of increasingly negative real returns in the fixed income market.

“However, we advise investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings.”

Also, Sola Oni , a stockbroker and chief executive officer of Sofunix Investment and Communications Limited, said investment in money market instruments and fixed income securities were not attractive because of their negative returns due to low yield and double-digit inflation.

“Investors would naturally opt for where they can generate optimal profit. At the moment, equities are about the major option that can meet investment objectives of many discerning investors.

“Our stock market is forward looking. Investors have realised that third quarter (Q3) results of many companies have signaled better performance for the year end results, which will begin to roll in as from early 2021.

Therefore, sustained massive demand for equity is not unconnected with investors’ anticipation of higher dividend payout and possible declaration of bonus shares. Portfolio re-alignment is going on in favour of equity investment. We should also appreciate that investment in equity can be used as a hedge against inflation,” Oni said.

Outlook

Going forward and ahead to close the year, analysts at Investdata Consulting Limited envisage an uptrend in the last few trading day of the year on window dressing by fund managers, as players continue to interpret the recent improved activities in money and fixed income space.

They also see some level of stimulus from expected economic data, coupled with the ongoing portfolio repositioning ahead of 2020 full year earnings reporting season in Q1 of 2021.

“We recommend that investors stay in stocks as the vaccine led rally in global markets and inflow of funds into equity space in emerging markets due to prevailing low interest rates will support equity assets.

“Also, the ongoing reforms in the exchange market are likely to attract foreign portfolio investors as many stocks on the exchange are still undervalued.

“Meanwhile, market correction is evitable, being a regular behavior of stock markets after witnessing a rally.

“Any pullbacks at this phase of market recovery will support the upside potentials. This is especially as many fundamentally sound stocks remain underpriced, while the dividend yields of major blue-chips continue to look attractive, despite the recent TB rates hike,” they said.