2020 IN REVIEW: See the Nigerian stocks that fuelled N6.5trn gains in 2020

Few days from now, the eventful year 2020 will be a thing of the past. No doubt, the year in review came with both dark and silver linings seen across every sector of the Nigerian economy, including the stock market.

For the stock market, some investors have reason to smile amid a difficult year as they booked about N6.5 trillion gains in 2020. This is because the value of listed stocks, which had opened the year at N12.971 trillion, increased to N19.570 trillion as at Monday, December 21.

With a year-to-date return of 39.50 percent as at Monday, December 21, 2020, Nigerian stocks look set to close the year as the best performers among all 93 indices tracked by Bloomberg.

BusinessDay trend watch reveals the stocks that contributed immensely to this huge gain. Interestingly, most of these equities were among analysts picks as at January 2020.

Stocks that have rewarded investors with impressive returns year-to-date are: Airtel Africa (+159.2%), AIICO (+80.6%), Dangote Cement (+62.3%), FCMB (+62.2%), Africa Prudential (+53.8%), BOC Gas (+44%), BUA Cement (+57.1%), Cutix (+48.9%), Dangote Sugar (+32%), Fidson Healthcare (+45.2%), and Flour Mills (+35.3%).

The low-yield environment in the Fixed Income (FI) market, attractive valuations across the equities space as well as the dividend pay-out opportunities in the market saw fund managers and the retail investors’ pile into the equities market.

Also on the list of stocks that yielded good return in 2020 are: FTN Cocoa (+240%), Fidelity Bank (+24.4%), LASACO (+28%), Livestock Feeds (+150%), May & Baker (+99.5%), Mutual Benefit (+30%), Mobil Oil (+54.2%), MTNN (+52.4%), Neimeth (+287.1%), Northern Nigeria Flourmills (+42.6%), NPF Microfinance Bank (+34.8%), Okomu Oil Palm (+63.7%) and Presco (+51.2%).

Others are: Sunu Assurance (+200%), United Capital (+88.3%), Union Dicon (+40.9%), Vitafoam (+64.8%), Lafarge Africa (+47.1%), and Zenith Bank (+30.6%).

The Nigerian stock market had kicked off 2020 with an impressive run, rising 10 percent in January amid renewed hope over economic growth driven by increased oil prices.

Though, the realities of the coronavirus pandemic started to set in as the first-quarter (Q1) 2020 wore on; it impacted negatively on global trade, and caused oil prices to tumble. Oil revenue is Nigeria’s main source of dollar earnings, so a collapse in oil prices puts pressure on government revenue and dampens investor sentiments.

While the economy struggled with the effect of the Covid-19 induced slowdown in economic activities, the equity market of Africa’s biggest economy depressed and sent the All Share Index (ASI) to a record low.

Since the imposition and eventual easing of a five-week lockdown in May, the ASI recorded an impressive rally, posting a year-to-date (YtD) return of about +37.12 percent as at trading week ended December 18, and +39.50 percent as at Monday, December 21, 2020.

“The main drivers of the rally have been the banks, with the Industrial Goods sector also supporting the market, trading in the green throughout the year,” Lagos-based Vetiva Research analysts state in a note to investors.

“The rally has also been supported by the dovish stance maintained by the Central Bank of Nigeria (CBN). The CBN cut the base monetary policy rate by 200 basis points (bps) to 11.5 percent, to boost lending, discourage savings and drive growth to counter the pandemic’s economic effects, while simultaneously keeping rates low in the fixed income market,” the analysts say.

The rally this year was driven by the hunt for yield by domestic investors who had little alternatives in a low yield environment.

Meanwhile, foreign investors have maintained a risk-off stance to the local market, as concerns over FX liquidity curbed appetite.

Although outflows are 8.5 percent lower year-on-year (y/y), inflows have eased substantially, falling 44.20 percent and 63.3 percent from 2019 and 2018 levels, according to Nigerian Stock Exchange (NSE) data.

Analysts at Vetiva Capital are maintaining a “cautiously optimistic outlook” for positive gains in the equity market for 2021.

“We note that the rally is expected to cool-off as investors start to take profit on impressive gains made in the period,” the Vetiva analysts note.

GTI Research analysts in their outlook into the remaining part of the week ahead of Christmas holidays who do not rule out profit-taking pressure on the first trading session of this week, believe the market is likely to sustain last week positive momentum heading into the Christmas break, “as long-term investors continue to position ahead of the new year amid robust system liquidity and low attraction in the fixed income space.”

Also, United Capital Research analysts say they think prop traders and short-term investors may book some profits at the start of this week “as traders close their books for the year. Thus, we think this may be a trigger for the market to pullback as the ASI is now deep in the overbought region.”