Investors in fast-moving consumer goods (FMCGs) companies and banking stocks recorded above average gains in the third quarter as Nigerian equities sustained its bullish streak with a net capital gain of N765 billion within the three-month period ended September 30, 2017.
Key indices at the Nigerian Stock Exchange (NSE) showed a largely positive third quarter, in spite of a sustained downtrend in the last month of the period. The main overall indices showed an average quarter-on-quarter return of 7.01 per cent, equivalent to net capital gain of N765 billion.
The All Share Index (ASI)-the value-based common index that tracks share prices at the Exchange, closed September at 35,439.98 points as against its opening index of 33,117.48 points at the beginning of the quarter in July 2017, representing average return of 7.01 per cent. Aggregate market value of all quoted equities rose from its closing figure of N11.452 trillion in the second quarter to close the third quarter at N12.217 trillion, representing net capital gain of N765 billion.
The sustained rally pushed the average year-to-date return by the third quarter to 31.87 per cent, as against 23.23 per cent recorded by the end of the second quarter.
Nearly all sectoral indices closed the third quarter positive with the exception of the NSE Oil and Gas Index which slumped by 13.10 per cent over the three-month period. Investors in the consumer goods and banking sectors were the toasts of the market with above average double-digit returns. The NSE Consumer Goods Index doubled the average return with a return of 15.89 per cent. The NSE Banking Index also performed above average with 10.6 per cent.
The NSE 30 Index-which tracks the 30 most capitalised stocks at the Exchange, posted a gain of 7.84 per cent. The NSE Industrial Goods Index rose by 2.69 per cent while the NSE Insurance Index appreciated by 1.36 per cent. The NSE Pension Index-which tracks stocks adjudged to be in line with pension investment guidelines, recorded a gain of 5.5 per cent while the NSE Lotus Islamic Index –which tracks stocks that comply with Islamic laws, appreciated by 8.87 per cent.
The performance of the market in the third quarter was largely driven by gains in the first two months of the period as investors appeared to concentrate more on profit-taking and rebalancing in the September. Most indices declined in September as investors scramble to monetise capital gains and reposition their portfolios ahead of the third quarter earnings of quoted companies.
The ASI indicated average decline of 0.18 per cent in September. The NSE Oil and Gas Index was also the worst-performing sector with negative return of -6.05 per cent. The NSE Industrial Goods Index dropped by 3.30 per cent. The NSE Consumer Goods Index declined by 2.65 per cent while the NSE 30 Index slipped by 0.95 per cent. On the positive side, the NSE Insurance Index rallied by 1.59 per cent while the NSE Banking Index posted a modest return of 0.11 per cent.
The performance of the equities market in the third quarter, though expectedly below the huge rally in the second quarter, has further reinforced the positive outlook of the market. The sustained quarter-on-quarter rally has seen most investors with considerable returns this year.
The second quarter witnessed a major rally at the NSE, which counterbalanced the deficit in the first quarter and pushed the overall market position to the positive side. Key benchmark indices at the NSE had shown that the market posted a quarter-on-quarter average return of 29.79 per cent, equivalent to net capital gain of N2.623 trillion in the second quarter ended June 30, 2017.
Aggregate market value of all quoted equities rose from the opening value of N8.829 trillion in April to close June at N11.452 trillion, representing an increase of N2.62 trillion. The ASI also showed corresponding appreciation from the quarter’s opening index of 25,516.34 points to close at 33,117.48 points.
The sustained recovery in the equities market represents a major relief for Nigerian investors, who had lost N3.98 trillion in the past three years. The stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion. Aggregate market value of all quoted equities on the NSE closed 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.
Meanwhile, total turnover at the NSE last week stood at 1.33 billion shares worth N14.09 billion in 14,703 deals as against a total of 1.1 billion shares valued at N17.86 billion traded in 16,070 deals in the previous week. The financial services sector remained atop activity chart with 1.06 billion shares valued at N7.34 billion in 8,202 deals; representing 80 per cent and 52.1 per cent of the total equity turnover volume and value respectively. The industrial goods sector staged a distant second with 91.35 million shares worth N2.78 billion in 933 deals. The consumer goods sector placed third with a turnover of 70.19 million shares worth N3.4 billion in 2,719 deals.
The three most active stocks were Continental Reinsurance Plc, Sterling Bank Plc and Access Bank Plc, which jointly accounted for 412.84 million shares worth N1.49 billion in 817 deals, representing 31.14 per cent and 10.55 per cent of the total equity turnover volume and value respectively.
Also traded during the week were a total of 274 units of Exchange Traded Products (ETPs) valued at N636,148 in 18 deals compared with a total of 58 units valued at N90,475 traded in five deals in the previous week.
A total of 7,424 units of Federal Government bonds valued at N6.689 million were also traded last week in 18 deals compared with a total of 178 units valued at N163,407 traded in two deals two weeks ago.
Market analysts remained optimistic on the performance of the equities market as many companies indicated their third quarter earnings report might be ready this month.
“In the coming week, we believe market performance will be majorly driven by investors’ expectation of third quarter 2017 report card. Nonetheless, we advise investors to stay bullish on stocks with sound fundamentals,” Afrinvest Securities stated.
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