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BusinessDay
Nigeria's leading finance and market intelligence news report.

Banking index sees biggest gain in 4yrs on renewed investor appetite, bargain hunting

...stocks rebound from year-low with second-biggest gain in 2020

Banking stocks were the toast of investors on Tuesday on the floor of the Nigerian Stock Exchange as renewed appetite and bargain hunting drove the banking index, the gauge used to measure the performance of banking stocks, to a 7.99 percent gain, the biggest since June 20, 2016 when it gained 8.07 percent.

Tier-1 lenders led the pack with Access Bank gaining 9.74 percent; Zenith Bank gained 8.59 percent; Guaranty Trust Bank gained 7.03 percent, and UBA gained 6.20 percent. Investors’ interests in banking stocks also propelled the benchmark index 1.70 percent to the highest since January 9, 2020.

The renewed interest in banking stocks is coming a few days after the release of annual financial reports of Zenith Bank, UBA, and GTBank.

According to Gbolahan Ologunro, an analyst at CSL Securities, investors are taking advantage of a significant moderation in the price of these Bellwether stocks and positioning themselves.
“With the results pouring in, the dividend yield of these banks in double-digit gives an attraction to investors,” Ologunro said.

According to BusinessDay calculations, GTBank’s dividend yield stood at 11 percent; Zenith Bank 14 percent, and UBA 12 percent.

Dividend yield tells an investor how much dividend income such investor gets in relation to the price of the stock.

The rally in bank stocks comes as the Nigerian equity market saw its biggest gain since early January to lift the market from its lowest point in the year.

The stock market rose 1.7 percent on Tuesday following gains in banking stocks including MTNN which gained by almost 5 percent in the day.

Stocks had plunged to their lowest in the year, after the best start to a year since 2013 at least, paving the way for investors to buy cheap as the world fights to control the coronavirus disease spread and weaken its economic impact.

The IMF and the World Bank on Monday said they stood ready to support countries facing immediate financing needs arising from the virus crisis.

Similarly, the representatives of the world’s seven most industrialised countries (G7) will meet to decide on an effective response to the threat posed by the COVID-19 outbreak to global economy.

On its part, OPEC and its members are expected to announce deep cuts to oil production that would prop up price this week. Already, Brent has pared some of its losses last week and risen to $53.26 per barrel ahead of the announcement.

The calmness with which Nigeria has been able to curtail the rampaging coronavirus and moderation in oil prices have further boosted investors’ confidence in the market, said Ologunro.

At the close of trading, the total volume of trades increased by 19.26 percent to 387.90 million units, valued at N5.08 billion and exchanged in 4,901 deals. GTBank was the most traded stock by volume and value at 83.12 million units and N2.01 billion, respectively.

Also, the Consumer Goods Index widened by 1.97 percent, with losses recorded across the industrial goods, down 4.27 percent, insurance down 1.59 percent, and oil and gas down 0.08 percent.

 

OLUFIKAYO OWOEYE & SEGUN ADAMS

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