Small cap stocks lead the charge as bulls push NSE Index higher

Investors are gradually becoming more confident to invest in the stock market after another week of gains at the Nigerian Stock Exchange. The stock market closed the week trading at 26,991 points, up by about 0.5 percent during the past week.

Last week, as much as 40 stocks appreciated in price, higher than 39 stocks which posted a positive performance in the previous week.

The top performers were largely small cap stocks where investors seeking bargain prices have caused significant stock price jumps in the market. Neimeth was the top performer during the week with a stock price jump of around 40 percent as the stock rose from 40 kobo to 56 kobo during the past week. Behind Neimeth were Cornerstone (35.48%), Chams (33.33%), Ikeja Hotel (31.58%) and Conoil (20.13%).

Other top performers during the week were Learn Africa (18.87%), Forte Oil (13.84%), Ekocorp (10%), Flour Mills (9.85%) and McNichols (9.52%).

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“Investors took particular interest in smaller companies during the week in search for big gains in the market. 6 out of the top 10 performers were trading below N1 during the week, only 3 stocks among the top 10 performers had their stock prices above N10, showing the over concentration of small cap stocks during the past week,” said Obinna Uzoma, chief economist at EUA Intelligence.

Amidst decent returns from small cap stocks during the week, it was not a fantastic week for all investors as some large cap stocks took a beating in the market during the past week. In total, as much as 23 stocks declined in value during the past week, higher than the 11 recorded in the preceding week while 102 stocks saw their prices relatively unchanged, lower than the 116 recorded in the previous week.

The biggest laggards in the stock market during the past week were: Lasaco (-20.69%), Jaiz (-11.27%), Associated Bus Company (-8.89%), Sterling (-8.52%) and Aiico (-6.58%).

Other market decliners in the past week were Wema (-6.58%), Transcorp (-6.42%), Ecobank (-6%), Nascon (5.72%) and Unilever (5.68%).

Noticeably, none of the banks made up the top 10 performers in the market during the past week but three slipped into the worst performers list as investors worry that lower treasury yields will impact the revenue and performance of banks during the final quarter of the year.

Investors are also wary of the impact of the billions in potential sterilised funds the banks will be forced to park at the CBN after the apex bank withheld almost N500 billion in additional cash reserve ratio from 12 banks who failed to meet up the 60 percent loan to deposit ratio requirement at the end of September this year.

Investors are also waiting to see how many of the banks will meet up the new CBN requirement of 65 percent loan to deposit ratio at the end of the year.

“While it is very clear that investors are still very cautious, it is very likely that they won’t soon throw caution to the wind as the hunt for yield begins. I think the stock market should brace up for billions that will flow into it till year end so long as treasury yields remain so low in the market. I just hope that the strange yield curve doesn’t lead to a financial crisis in the country or trigger a stock market bubble,” Uzoma concluded.