Investors in Nigerian equities last week recovered N408 billion in capital gains as the stock market rallied to close the week at its highest level in the past four weeks. Quoted equities sustained uptrend through the five-day trading sessions, the best performance for the foreign exchange-battered stock market in recent period.
While there were still wide underlying negative sentiments, expectations on corporate earnings and dividend recommendations spurred bargain-hunting rally within the highly influential large-cap stocks, which overshadowed the losses by several other stocks.
Amidst global declines in share prices, Nigerian equities played the contrarian stocks as companies’ dividend recommendations trickled in. Aggregate market value of all quoted companies on the Nigerian Stock Exchange (NSE) rose to four-week high to close weekend at N8.491 trillion as against its week’s opening value of N8.083 trillion.
The All Share Index (ASI)-the benchmark value-based index that tracks prices of all quoted equities on the NSE rose by 5.05 per cent to close at 24,689.69 points as against its opening index of 23,501.87 points. The rally reduced the negative overhang at the market with the average year-to-date return improving to -13.80 per cent.
The Nigerian stock market showed exceptional performance in a week dominated globally by negative sentiments. Across the advanced and emerging markets, stocks took a plunge on worries over the global economy prospects and domestic issues. In United Kingdom, the UK FTSE dropped by 3.7% to hit its three and a half years low. In United States, Standards & Poor’s 500 Index declined by 2.7% while the NASDAQ Index dropped by 2.2%.
In Europe and Asia, The Japan Nikkei Index lost 11.1%. The France CAC Index dropped by 5.8%. The Germany DAX slipped by 4.1% respectively W-o-W amid worse-than-expected financial sector stocks results which exacerbated bearish sentiment. Russia’s RTS Index dipped by 3.9%. India’s BSE Index dropped by 6.6% while the Chinese market closed flat.
In Africa, the South Africa FTSE/ JSE Index dropped by 4.7%. The Kenya NSE Index declined by 6.3% while the Egypt EGX Index dropped by 0.2%. Besides Nigeria, the Ghanaian market shone during the week with the Ghana Stock Exchange Composite Index rising by 1.4 per cent.
In Nigeria, there were 26 advancers to 30 decliners last week as against 30 advancers and 40 decliners recorded in the previous week. A total of 134 equities were unchanged last week as against 120 stocks in previous week.
The Nigerian market found a major boost in the significant rally by its most capitalised stock, Dangote Cement, which recorded the highest week-on-week gain of 17.86 per cent to close the week at N146.50. Forte Oil followed Dangote Cement with a gain of 14 per cent to close at N342 while Mobil Oil Nigeria rose by 8.11 per cent to close at N159.60 per share.
Total turnover stood at 1.41 billion shares worth N17.28 billion in 14,914 deals as against a total of 5.087 billion shares valued at N18.488 billion traded in 16,711 deals in the previous week. The traditionally dominant financial services sector led the activity chart with a turnover of 1.25 billion shares valued at N7.17 billion in 8,451 deals; representing 88.98% and 41.49% of the total equity turnover volume and value respectively. The oil and gas sector followed with 50.714 million shares worth N5.338 billion in 1,520 deals. The third place was occupied by the consumer goods sector with a turnover of 37.534 million shares worth N3.117 billion in 2,473 deals.
The three most active stocks, in terms of volume, were Guaranty Trust Bank Plc, FCMB Group Plc and Wema Bank Plc, which altogether accounted for 667.292 million shares worth N4.256 billion in 2,114 deals, representing 47.44% and 24.63 % of the total equity turnover volume and value respectively.
Also traded during the week were a total of 115,641 units of Exchange Traded Products (ETPs) valued at N1.285 million executed in 28 deals, compared with a total of 34,089 units valued at N604,908.34 transacted in 34 deals in the previous week. A total of 39,340 units of both State and Federal Government Bonds valued at N44.246 million were traded in three deals, compared with a total of 4,190 units valued at N4.884 million traded in five deals in previous week.
Nigerian Breweries, NSE’s second most capitalised stock, during the week, declared a final dividend of N28.5 billion, in addition to interim dividend of N9.5 billion earlier paid by the company, bringing the total cash payouts for the year ended December 31, 2015 to N38 billion. A breakdown of the dividend recommendation by the board indicated that shareholders would receive final dividend of N3.60 per share, in addition to interim dividend per share of N1.20, bringing total dividend per share to N4.80 for 2015.
The board of Dangote Cement is scheduled to meet later this month to consider audited accounts for 2015 and the dividend recommendation to shareholders. Many quoted companies are expected to release their audited report and dividend recommendations in the next two weeks.
“We imagine that aside bargain hunting, current valuation also looks attractive for “dividend investors” who may want to take position in stocks with consistent dividend payment history ahead of full year corporate releases. On the back of depressing share prices, dividend yield is expected to improve significantly assuming quoted companies maintain last dividend paid,” Afrinvest Securities stated in a weekly note to investors.
While analysts noted that the full-year earnings for 2015 might be uninspiring given pressures observed on margins by the third quarter of the year, market pundits expected several stocks, especially in the cement category, to sustain their dividend payment culture.
“Our estimate puts average expected dividend yield at 4.1% for stocks within our coverage, creating a compelling investment case for positioning at current valuation. On the basis of the above, we observed that “dividend investors” can position in key counters with sound dividend payment history. In addition, overall market dividend yield is estimated at 4.3%,” Afrinvest Securities stated.
Analysts however remained cautious about the short-term outlook, noting that the market remains most attractive to long term domestic investors.
“We believe recent uptrend in the market may not be sustained as fundamentals remain weak, coupled with the unimpressive earnings expectation. However, we expect increased buying activity in dividend paying counters as investors bet on stocks with consistent dividend paying history currently trading at attractive prices ahead of full year earnings and corporate actions,” Afrinvest Securities summed up the fluctuations that may characterize trading in the days ahead.
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