The nation’s stock market is currently on a ‘steroids’ in just seven trading days so far this year, stocks are already up 9.07percent as at Friday as investors take position ahead of the earnings season. The market capitalization advanced significantly by N2.2trillion on the back of listing of BUA Cement Plc on the NSE.
To better appreciate this resurgence, a week ago, stocks closed the year with a negative return of 14.6percent in back to back losses closing the decade with a paltry return of just 28.9percent.
So far as at Friday, Industrial goods giant, Dangote Cement has returned 21.13percent, Teleco-giant, MTN returned 9.52percent, First Bank’s parent company, FBNH has returned 23.57 percent, the highest from Nigeria’s top 5 banks, Zenith Bank and UBA have also both returned 17.57percent and 17.48percent respectively. Other tier-1 banks such as Guaranty Trust Bank with 7.24percent and Access Bank returned 8percent
The ripple effect of the upbeat performance also reflected in the performance of Tier 2 banks (in fact all banking stocks are positive this year). Fidelity, Ecobank and even Unity Bank are up double digit. Flour Mills, and Julius Berger have also posted positive returns year to date.
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What could be propelling this rally?
Firstly, these stocks have been relatively cheap for months trading as low as 2x their earnings per share with an indicative double-digit dividend yield.
Also, investors are quickly taking positions ahead of the earnings season, which is when banks start to release their full-year results. With share price at low valuation, multiples dividend yields are in double digits and if priced appropriately could be higher than the inflation rate.
Another reason for this bullish trend is the central bank’s recent decision to ban investors from the Open Market Operations (OMO) window. The decision has sent everyone running towards treasury bills driving yields to multi-year lows of 5.6percent. And it appears the stock market is now the logical destination of any discerning investor.
If you’re about to get into this game keep your portfolio close to your chest and watch out for the bears.