Nigeria’s stock market is on its path to making history again in 2020. The market is now world’s best performer after a seven-day rally put equities on a ‘jet speed’ gain, according to BusinessDay analysis of Bloomberg data.
Year-to-date (ytd), the All Share Index (ASI) has returned about 6.41 percent while majority of other sectoral indices and cobranded indices have shown similar growth.
The NSE 30 Index has increased by +7.28 percent year-to-date; NSE Banking Index (+12.43 percent), NSE CG Index (+7.69 percent), NSE Consumer Goods Index (-0.03 percent), NSE Industrial Index (+7.08 percent), and NSE Insurance Index (+6.41 percent).
Others are NSE Lotus Islamic Index (+5.88 percent), NSE Main-Board Index (+2.21 percent), NSE Oil/Gas Index (-5.85 percent), NSE Pension Index (+5.56 percent), NSE Premium Index (+10.46 percent), NSE-AFR Bank Value Index (+12.97 percent), NSE AFR Div Yield Index (+12.39 percent), NSE MERI Growth Index (+2.25 percent), and NSE MERI Value Index (+17.65 percent).
Market sources are attributing the bullish run on stocks to attractive valuations, adding that the Nigerian equities market had been relatively undervalued in comparison to other African countries.
Another important factor said to be driving the positives is investors searching for positive real returns on the back of falling yields in the money market as well as increasingly positive outlook for major sectors of the Nigerian economy.
On Wednesday, January 8, the market gained 3.54 percent and week-to-date (Wtd) rally of 5.91 percent. Investors have increased their stakes in banking, industrial goods, and insurance stocks.
Following the NSE-ASI in the top performing stocks is the S&P IPSA (Índice de Precios Selectivo de Acciones) which seeks to measure the performance of the largest and most liquid stocks listed on the Santiago Exchange.
While the S&P/CLX IPSA (CLP) TR has gained 2.76 percent this year, the BLOM Stock Index, a major stock market index which tracks the performance of largest companies listed on the Beirut Stock Exchange, has increased by 2.06 percent.
The RTS Index “Russia Trading System” which is a free-float capitalisation-weighted index of 50 Russian stocks traded on the Moscow Exchange has gained 1.67 percent this year.
S&P/BMV IPC, which measures the performance of the largest and most liquid stocks listed on the Bolsa Mexicana de Valores, is up by 1.44 percent. The index is designed to provide a broad, representative, yet easily replicable index covering the Mexican equities market.
The Karachi Stock Exchange 100 Index, also called KSE-100 Index, increased by 1.27 percent. This stock index acts as a benchmark to compare prices on the Pakistan Stock Exchange (PSX) over a period.
Mauritius Stock Exchange Semdex Index, a major stock market index which tracks the performance of all companies listed on the Stock Exchange of Mauritius, increased this year by 0.94 percent.
At the Nigerian Stock Exchange (NSE), the value of listed equities has increased by over N816 billion ($1.6 billion) year-to-date (Ytd). The early-year rally seen at the nation’s bourse is fuelled by higher oil prices and the CBN’s crushing rates on T-bills. Oil prices surged on Friday following the assassination of Iran’s most powerful and visible military leader, Qassem Soleimani, by US forces in Iraq, but they are now below $70/barrel ($68.60/b).
Also, while many companies prepare to release their full-year financials from next month, the record positive looks good to continue as more investors move to buy value stocks with history of dividend payments and capital appreciation.
Guaranty Trust Bank plc and Zenith Bank plc, which are among analysts’ stock picks for 2020, may get their full-year 2019 financial statements released to the investing public ahead of their listed peers. The boards of directors of both tier-1 lenders will be meeting later this month to consider their full-year results, according to notices they sent to the Nigerian Stock Exchange.
Cumulative value of listed equities rose to N13.787 trillion as at January 7, 2020 from N12.971 trillion at the beginning of the year. The NSE All Share Index (ASI) which opened the year at 26,867.79 points has advanced remarkably to 28,562.48 points.
On Monday, January 13, the Nigerian Stock Exchange will hold its 2019 Market Recap and 2020 Market Outlook. Ahead of this event, analysts anticipate an extension of positive performance into future trading sessions due to current market sentiment and renewed buy-side interest in the domestic bourse.
“The bullish performance persisted at the domestic bourse as investors continued to take positions in attractive tickers. With major indicators (positive market breadth, increased market activity as well as all sectors closing higher) coming in positive, we expect no deviation from this bullish trend on Thursday, though we anticipate mild profit taking action,” said Lagos-based Vetiva Securities.
Analysts at Sigma Pensions Limited, a Pension Fund Administrator, said the combination of a low interest rate profile at the start of the year, cheap equity valuations and double-digit dividend yields in some sectors presents scope for positive sentiments towards Nigerian stocks.
Also, FBNQuest research analysts expect the market to maintain the positive trading pattern.
GTI Research analysts had in their 2020 outlook said they expect Nigeria equity market to recover in 2020, “driven by low yields in the fixed income market (versus high inflation rate), dissipation of political risk, and expectation of improved budget implementation”.
“In anticipation of the release of the full-year 2019 earnings result by many of market players in the coming weeks, we expect to see increased positioning by portfolio investors, supported by the declining yields on both fixed income instrument and fixed deposit account,” GTI analysts said in their January 6 note to investors.
As such, they expect the market to close positive next trading week.
Iheanyi Nwachukwu
