Nigerian equities bucked the slowdown in the global equities markets to sustain a five-week consecutive rally with a gain of N214 billion last week as investors await the decisions of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN). The MPC is scheduled to meet between Monday May 23 and Tuesday May 24.
Amidst declines by several benchmarks in the global advanced and emerging markets, Nigerian equities recorded a top-of-the-chart gain of 2.55 per cent last week, the highest by any of the tracked African and global equities markets. The rally, led by banking stocks, left investors with a net week-on-week gain of N214 billion, after deducting losses due to compulsory delisting of eight companies during the week.
The All Share Index (ASI)-the common value-based index that tracks prices of all quoted equities on the Nigerian Stock Exchange (NSE), spiraled upward to another level to close at 27,116.45 points as against its week’s opening index of 26,441.03 points, representing an increase of 2.55 per cent. Aggregate market value of all quoted companies rose from the week’s opening value of N9.099 trillion to close at N9.313 trillion, showing an increase of N214 billion or 2.36 per cent. The difference between the ASI and total market capitalisation was due to the delisting of eight companies during the week.
With the sustained rally, the negative average year-to-date return for Nigerian equities, though still negative, improved to -5.33 per cent. However, the market became tight during the week, with 35 gainers to 37 losers as against 54 gainers against 17 losers recorded in the previous week. A total of 109 equities closed flat last week compared with 118 equities that closed unchanged in the previous week.
Price trend analysis indicated that banking stocks substantially coloured the overall market situation. The NSE Banking Index recorded average return of 6.60 per cent. United Bank for Africa (UBA) jumped to the front of the counter at the stock market with a gain of about 22.6 per cent. The NSE 30 Index recorded above average return of 3.01 per cent, underlining the fact that highly capitalised stocks drove market performance. The NSE Industrial Goods Index also returned 3.91 per cent. The NSE Consumer Goods Index rose by 1.94 per cent while the NSE Lotus Islamic Index improved by 1.13 per cent. However, the NSE Insurance Index declined by 1.73 per cent while the NSE Oil and Gas Index slipped by 0.76 per cent.
UBA led the gainers with a gain of 22.59 per cent to close at N4.45 per share. Conoil followed with a gain of 20.67 per cent to close at N23. Oando rallied 13.42 per cent to close at N6. Trans Nationwide Express rose by 12.71 per cent to close at N1.33 while Access Bank appreciated by 10.77 per cent to close at N5.35.
Turnover also showed improved investors’ appetite as investors scrambled for undervalued bargain stocks. Total turnover stood at 2.45 billion shares worth N13.145 billion in 23,680 deals last week as against a total of 1.83 billion shares valued at N14.47 billion traded in 20,058 deals two weeks ago. The financial services sector led the activity chart with a turnover of 2.01 billion shares valued at N9.49 billion in 14,200 deals; representing 82.3 per cent of the total equity turnover volume. Conglomerates sector followed with 208.48 million shares worth N268.05 million in 1,134 deals. The oil and gas sector placed third with a turnover of 80.27 million shares worth N692.61 million in 2,826 deals.
The trio of Wema Bank Plc, Zenith International Bank Plc and Access Bank Plc were the most active with the three stocks jointly accounting for 871.33 million shares worth N5.30 billion in 3,956 deals, representing 35.6 per cent of the total equity turnover volume.
Also, a total of 307,411 units of Exchange Traded Products (ETPs) valued at N21.406 million were traded in 38 deals last week compared with a total of 382,448 units valued at N10.288 million traded in 43 deals two weeks ago.
In the bond market, a total of 4,143 units of Federal Government Bonds valued at N4.248 million were traded in eight deals as against a total of 8,033 units of Federal Government valued at N8.923 million traded in six deals in the previous week.
On the downside, Vitafoam Nigeria recorded the highest loss of 20.85 per cent to close at N4.29. Tiger Branded Consumer Goods followed with a drop of 19.87 per cent to close at N4.80. NCR dropped by 14.14 per cent to close at N8.99. Unilever Nigeria declined by 13.89 per cent to close at N31 while Ikeja Hotel depreciated by 13.88 per cent to close at N2.11 per share.
“As positive sentiments have thrived in the market on account of government reforms which have been implemented, investors now look forward to the outcome from the deliberations at the Monetary Policy Committee (MPC) meeting in the coming week and this is expected to drive market performance,” Afrinvest Securities, a Lagos-based dealer at the NSE, stated in a weekend note on the outlook of the market this week.
The MPC is expected to begin a two-day meeting on Monday to review developments within the last two months and the impact on the direction of Nigerian economy.
Analysts at Afrinvest Securities stated that while predicting the actual line of action of the MPC appears dicey, the most probable option for the MPC may be to adjust the peg on foreign exchange rate close to the N285 per dollar rate as guided by Petroleum Products Pricing Regulatory Agency (PPPRA).
Analysts’ expectation is that the MPC will adopt a more flexible exchange rate policy that will close the spread between the officialand interbank market rate and the N285 per dollar rate assumed by PPPRA in its pricing template in order to reduce the pressure on the parallel market rate which has already been endorsed by the pronouncement of NNPC.
Analysts noted that the Committee at its last meeting guided that it will maintain a positive real interest rate for which MPR was hiked to 12 per cent when February inflation touched 11.4 per cent. Inflation rate has accelerated to 12.8 per cent and 13.7 per cent in March and April 2016 with higher projections for coming months at 14.6 per cent. Thus, for consistency, it would be proactive, if the Committee frontloads inflation expectation into MPR in anticipation of higher prices. Hence, it is assumed that MPC could set MPR at 15per cent to ensure positive real return in the interim.
“Given that inflation in Nigeria, most especially the recent episode, has been studied to be majorly cost-push, we believe if the Committee leaves MPR unchanged, allowing the market to find its true yield, but concentrating on its OMO mop-up strategy of controlling liquidity, the result may be more absorptive for the economy. Therefore, the dilemma for the Committee would then be to either increase MPR to 14 per cent or 15 per cent in addressing negative real return problems and risk higher cost of credits to both government and businesses or allow the market set interest rate and risk inconsistency in policy,” Afrinvest Securities stated in a pre-MPC meeting preview.
In the global equities market, most advanced and emerging markets remained largely on the downtrend. In Africa, Kenya’s Nairobi Stock Exchange Index declined by 1.2 per cent. Ghana’s Ghana Stock Exchange Index dropped by 1.0 per cent while Egypt’s EGX Index slipped by 0.3 per cent.
In the emerging markets of Brazil, Russia, India, China and South Africa (BRICS), it was a largely week. Brazil’s Ibovespa Index depreciated by 2.9 per cent. Russia’s RTS Index declined by 1.6 per cent. India’s Bombay Stock Exchange (BSE) Index slipped by 0.7 per cent while the Chinese Shanghai Composite Index dropped by 0.1 per cent. However, South Africa’s FTSE Index played the contrarian with a gain of 2.3 per cent.
In Europe, United Kingdom, the FTSE Index inched up by 0.2 per cent. France’s CAC Index also recovered with a gain of 0.4 per cent. However, Germany’s DAX Index declined by 0.6 per cent. In United States, the S & P 500 and the NASDAQ Index declined by 0.3 per cent and 0.1 per cent respectively. In Asia, Japan’s Nikkei rallied a gain of 2.0 per cent while Hong Kong Hang Seng Index also rose by 0.7 per cent.
RipplesNigeria …without borders, without fears
- Tinubu breaks silence on #EndSARS protests - October 20, 2020
- BREAKING: 118 new cases of COVID-19 take Nigeria’s total to 61,558. Deaths 1,125; discharges 56,697 - October 19, 2020
- Zamfara Assembly summons commissioners, governor’s aide over N37bn promissory note - October 19, 2020