Nigeria’s stocks rose in the longest winning streak since July 2013 as investors bought companies they deemed oversold following declines spurred by concern lower oil prices and elections may hurt the economy.
Whilst it appears the positive trend remains sustained in the last trading days, analysts at Afrinvest advise investors to remain cautious as the momentum of gains seems to be thinning out.
The NSE ASI traded marginally up on Wednesday to sustain eight consecutive days of gains after closing at 30,195.56 (17bps). Wednesday’s gain was bolstered by GTB (2.2%), UBN (4.9%) and FBNH (2.5%). Also, the total volume and value traded on the floor of the Nigerian bourse rose 0.3% and 0.2 % to close at 369.9m units and N4.5trn respectively, according to a report from Afrinvest.
“Bargain hunters are taking advantage of the low price of a number of stocks,” Ikechukwu Iheanacho, who helps manage about N6 billion ($30 million) of equities and bonds at Chapel Hill Denham Securities Ltd., said by phone from Lagos. “They have suffered far beyond what the fundamentals would suggest, largely on the back of oil and foreign investors coming out of the market ahead of the elections.”
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The Nigerian Stock Exchange All Share Index rose 0.2 percent to 30,195.56 by the close, extending its eight-day gain to 9.5 percent. Stock prices fell to 7.2 times estimated earnings on February 13, the lowest in Africa and below the MSCI Frontier Markets Index multiple of 9.9. Valuations rebounded to 8 times predicted earnings for the next 12 months on Wednesday.
Nigeria, which derives 90 percent of export earnings and 70 percent of government revenue from oil, has been battered by crude prices collapsing by almost 50 percent since June. The naira has depreciated 19 percent against the dollar in the past six months, more than any of the other 23 African currencies tracked by Bloomberg.
Political tensions in the nation have intensified after presidential elections expected to be the closest in 16 years were delayed until March 28.
Guaranty Trust Bank Plc, the biggest bank by market value, has climbed the most in the last eight days, rising 36 percent. FBN Holdings Plc, which owns Nigeria’s largest lender by assets, First Bank, is up 22 percent. Zenith Bank Plc has increased 20 percent in the period.
GT Bank and Zenith are “some of our favorite shares,” said Iheanacho. “They are among the banks that have the greatest propensity to weather the storm.”
