The Nigerian stocks edged higher, Thursday, surging the most in over 5 years, after investor’s channelled excess liquidity arising from failed transactions in the Wednesday treasury bills auction, into equities.
The equities market was up by 6.23 percent at the close of trading Thursday, its biggest daily gain since 1st April 2015, when it gained 8.31 percent according to market data tracked by BusinessDay.
The All-share index rose to pass 35, 342 points from the 33,291.27 points which it opened with, as the low yield environment alongside an impressive third-quarter performance from companies, continue to spur investors to interest in stocks.
As such, investors gained ₦1.1tn as market capitalisation rose to ₦18.5tn
Yields across all tenors of treasury bills crashed further to as lower lows, as investors fell on one another, scrambling for the short-term instrument in a Wednesday auction conducted by the Central bank on behalf of the government.
Investors subscribed a total of N603.12 billion worth of T-bills, about four times the N167.8 which the apex bank planned to offer.
Investors bid rates as high as 1 percent for both the 91 and 182 days tenor of the short-term instrument, while they bid as much as 2 percent for the 364-day bills. Meanwhile, the CBN lowered rates across the three tenors to 0.035, 0.15, and 0.3 percent.
That’s lower compared with a previous stop rate of 0.34, 0.5 and 0.98 percent on the 91-day, 182-day and 364-day bills.
Irrespective, investors were unbothered, posting more N435.3 billion worth of failed transactions recorded in the Wednesday auction.
Analysts have envisaged that with yields in the fixed income space largely subdued below inflation, the equities market would be in the receiving end of the excess liquidity from the T-bills auction.
“The excess liquidity that arose from the unsuccessful bids will find its way into the stock market, which has been on steroids with company’s posting impressive third-quarter numbers,” Gbolanhor Olurungo, senior analyst at Cordros Capital said.
Nigerian equities have been a viable option for investors since yields on fixed-income assets entered a free fall following the ban of non-bank domestic investors, by the CBN from participating in its short-term Omo bills.
Domestic institutional investors including Pension Fund administrators (PFAs) have since increased their exposure to stocks at 4.8 percent of their N11.3 trillion Asset under Management (AUM) in August.
With a year-to-date return of 31.7%, the Thursday rally was driven on the back of gains in Dangote Cement (+8.1%), BUA Cement (+10.0%) and Airtel Africa (+10.0%).
Similarly activity level surged as volume and value traded increased by 39.0 percent and 92.0 percent to 1.2bn units and ₦17.4bn in that order. The most traded stocks by volume were Zenith Bank (161.4m units), FBNH (121.5m units) and Access Bank (100.8m units) while Zenith Bank (₦4.5bn), MTNN (₦2.7bn) and GTB (₦1.8bn) led by value.