NSE RoundUp! Nigerian equities sustain broad rally on steady corporate earnings

Nigerian equities traded last week with widespread positive sentiments as investors appeared to show stronger appetite for quoted companies, most of which had just released their audited annual reports and dividend recommendations.

All major indices at the Nigerian Stock Exchange (NSE) showed sustained, though modest, rally with demand for shares across the sectors setting the market on the sellers’ side. The average benchmark indices showed a week-on-week average return of 0.90 per cent, equivalent to net capital gain of N80 billion.

Besides, nearly all sectoral indices closed on the upside with the exception of the banking sector where investors sought to readjust portfolios after major banks concluded their annual general meetings during the week. From the insurance to consumer goods, oil and gas and industrial goods sectors, continuing rally nudged share prices to higher level, raising early optimism on the prospects of the equities market in the second quarter.

Most companies had released their annual report and accounts by the week ended March 31, 2017 in line with the extant rule at the Exchange which mandates companies to submit their annual audited report not less than 90 days after the end of the business year. Other companies that had missed the March 31, 2017 rushed through early last week to file their accounts, giving almost a summary view of the earnings outlook at the stock market. Most quoted companies, including the largest companies, run the 12-month Gregorian calendar as their business year and thus fall within the March 31 deadline.

Most analysts described corporate earnings for 2016 as resilient with traditionally active companies continuing to show good performance and returns to shareholders. While there were many increases in dividend recommendations, steep declines in share prices also boosted dividend yields for several stocks. With double-digit dividend yields in many cases, investors sought to cash in on the cash payouts, thus creating rallies that stimulated the pricing trend.

The All Share Index (ASI)-the value-based index that tracks share prices at the NSE, rallied by 0.90 per cent to close the week at 25,746.52 points as against its week’s opening index of 25,516.34 points.

Aggregate market value of all quoted equities also trended upward from the week’s opening value of N8.829 trillion to close at N8.909 trillion, representing net capital gain of N80 billion. The rally helped to moderate the negative overhang at the stock market, improving the negative average year-to-date return to -4.20 per cent.

Sectoral indices showed widespread demand for shares. The NSE 30 Index, which tracks the 30 most capitalised companies at the stock market, recorded a week-on-week return of 1.11 per cent. The NSE Industrial Goods Index recorded the highest weekly gain of 5.15 per cent. It was followed by the NSE Oil and Gas Index with a gain of 4.27 per cent. The NSE Insurance Index rose by 1.97 per cent while the NSE Consumer Goods Index appreciated by 0.80 per cent. However, the NSE Banking Index declined marginally by 0.20 per cent.

There were 36 advancers against 22 decliners last week as against 36 advancers and 24 decliners recorded in the previous week. Meanwhile, the larger chunk of the market remained dormant with 119 unchanged stocks last week compared with 117 flat stocks in the previous week.

On the upside, Learn Africa recorded the highest gain, in percentage terms, with a gain of 26.47 per cent to close at 86 kobo. Seven-Up Bottling Company trailed closely with a gain of 26.39 per cent to close at N104.90. Dangote Flour Mills rose by 21.60 per cent to N4.56. Nascon Allied Industries appreciated by 21.41 per cent to N8.62. Mobil Oil Nigeria grew by 20 per cent to N360 while Oando chalked up 18 per cent to close at N5.90.

On the downside, United Bank for Africa led the losers with a drop of 8.84 per cent to close at N5.26. Trans Nationwide Express followed with 8.08 per cent drop to close at 91 kobo. May & Baker Nigeria lost 7.37 per cent to close at 88 kobo. Eterna declined by 5.31 per cent to close at N3.21 while Conoil dropped by 5.0 per cent to close at N33.25.

Total turnover last week stood at 786.176 million shares worth N5.828 billion in 14,343 deals compared with a total of 3.195 billion shares valued at N104.217 billion traded in 14,674 deals two weeks ago. Transactions in the earlier week were buoyed by one-off acquisition deals in Mobil Oil Nigeria and Niger Insurance.

Read also: NSE LIVE! Equities sustain rally with N98b gain

The traditional dominant financial services sector remained atop the activity chart with 557.911 million shares valued at N2.669 billion traded in 7,340 deals; thus contributing 70.97 per cent and 45.79 per cent to the total equity turnover volume and value respectively. The consumer goods sector followed with 70.255 million shares worth N1.556 billion in 2,698 deals while the services sector placed third with a turnover of 50.558 million shares worth N70.773 million in 754 deals.

Banking stocks were the most active during the week. The trio of Fidelity Bank, FBN Holdings and Zenith International Bank were the most active and they jointly accounted for 292.363 million shares worth N1.128 billion in 2,485 deals, representing 37.18 per cent and 19.35 per cent of the total equity turnover volume and value respectively.

Also traded during the week were a total of 1,510 units of Exchange Traded Products (ETPs) valued at N4,113 traded in three deals compared with a total of 52,885 units valued at N425,464 traded in 19 deals two weeks ago.

In the debt segment, a total of 11,064 units of Federal Government Bonds valued at N10.256 million were traded week in 21 deals compared with a total of 2,870 units valued at N2.638 million traded in seven deals penultimate week.

Globally, the performance of the Nigerian equities market fell broadly within the context of African and emerging equities rally. The Ghana’s GSE Composite Index indicated a week-on-week gain of 1.7 per cent. South Africa’s FTSE/JSE Index appreciated by 1.5 per cent. Egypt’s EGX 30 rose by 0.8 per cent. Russia’s RTS Index inched up by 0.5 per cent. India’s BSE Sens rallied by 0.3 per cent. China’s Shanghai Composite Index rose by 2.0 per cent while Hong Kong Hang Seng Index appreciated by 0.2 per cent.

However, Kenya’s NSE ASI dropped by 0.4 per cent while Brazil’s IBOVESPA Index slipped by 0.5 per cent.

It was a mixed performance in other developed markets of America and Europe. In United States of America, the S & P 500 dropped by 0.2 per cent while the NASDAQ declined by 0.6 per cent. Germany’s DAX Index dropped by 0.8 per cent while Japan’s NIKKEI Index declined by 1.3 per cent. However, United Kingdom’s FTSE Index rose by 0.4 per cent while France’s CAC Index inched up by 0.1 per cent.

With sustained rally in the previous trading sessions and the absence of any major earnings release, analysts were cautiously optimistic on the outlook for the Nigerian equities market.

“This week, we expect a mix of bargain-hunting and profit-taking activities,” Cowry Asset Management stated in a preview.

Analysts at Afrinvest Securities took a long view of the earnings outlook for this year, but were still cautious about the immediate impact on equities given the distortions at the foreign exchange market.

“We are moderately optimistic on corporate earnings in the year although we expect the recent improvement in foreign exchange liquidity – which has resulted in the appreciation of parallel market foreign exchange rate– to positively impact cost of sales for manufacturers while improvement in fiscal revenue for the Sovereign and Sub-nationals will also be positive for consumer spending and earnings growth,” Afrinvest Securities stated.

“Despite our positive view of forward earnings, we expect investors’ appetite for equities to remain soft in the interim due to subsisting fragmentation of the foreign exchange market,” Afrinvest Securities concluded in a cautious endnote.

Analysts at Afrinvest Securities said they expected investors to begin to position ahead of the release of first quarter 2017 results but agreed with Cowry Asset Management that the two-week rally could engender profit-taking transactions, especially at the opening of trades this week.

“Improved investors’ confidence may make the equity market to appreciate in April 2017,” FSDH Merchant Bank stated.

According to analysts at FSDH Merchant Bank, while the performance of the equity market in the last five years shows that the market recorded negative performances between March and April, the equity market in the current year may not follow historical trend as the economic outlook becomes increasingly positive.

Analysts at FSDH Merchant Bank said they expected to see some improvements in investors’ appetite for equity investment in April 2017 due to relatively stable foreign exchange market, improved confidence on the outlook of the Nigerian economy, increase in oil price and improved production and expected decline in interest rate on fixed income securities.

“We recommend that investors should maintain a medium-to-long term position in the equity market. We maintain that long-term investors should take long positions in stocks that have strong fundamentals,” FSDH Merchant Bank concluded.

 

RipplesNigeria ….without borders, without fears

Click here to download the Ripples Nigeria App for latest updates

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now