- Fundamentals good, but caution remains
- Nigeria leads global stocks
By Taofik Salako, Deputy Group Business Editor
Investors are opening up buy orders to attract and close bargain deals in forward-looking transactions that seek to lock in positions in fundamentally strong and low-priced value stocks.
A major scramble last week netted Nigerian equities N802 billion capital gains in four trading sessions with average weekly turnover of more than N15 billion in recent weeks.
As Nigeria grapples with increasing confirmed cases of Coronavirus, transactions at the stock market showed a steady momentum and improving positive sentiments, with a slowdown in steep depreciation that had seen equities market losing N2.56 trillion last month.
Regulatory filings on insiders’ transactions indicated that more insiders- basically directors and top management staff were increasing their shareholdings or taking new positions. More than two-thirds of insiders transactions tracked by The Nation were on the purchase side, although many were not large-volume deals.
Extant rules at the stock market require every quoted company to report any transaction on its equities by identified individuals and institutions with material impact on the operations and shareholding of the company.
Benchmark indices at the weekend showed average gain of 7.19 per cent, equivalent to net capital gains of N802 billion for the four-day trading session. Aggregate market value of all quoted equities at the Nigerian Stock Exchange (NSE) rose for four consecutive trading sessions to close weekend at N11.946 trillion as against its opening value of N11.144 trillion for the week.
The All Share Index (ASI)- a common value index for all quoted shares at the NSE that doubles as Nigeria’s sovereign equities’ index, increased consecutively from its week’s opening index of 21,384.03 points to close weekend at 22,921.59 points.
Average gain so far this month now stands at 7.61 per cent, moderating the accumulated losses over the past three months to average net loss of 14.61 per cent.
A global review of tracked indices showed that Nigerian stocks were the best performing stocks last week, running ahead of leading advanced and emerging markets. United States’ benchmarks- S & P 500 and NASDAQ, rose by 1.6 per cent and 5.3 per cent.
Japan’s Nikkei 225 Index posted average gain of 2.0 per cent. Germany’s XETRA DAX Index appreciated by 0.3 per cent. China’s Shanghai Composite Index posted a gain of 1.5 per cent while South Africa’s FTSE/JSE All Share Index rallied by 2.3 per cent.
United Kingdom’s FTSE All Share Index declined by 1.7 per cent. France’s CAC 40 Index slipped by 0.5 per cent. Russia’s RTS Index dipped by 5.5 per cent while Egypt’s EGX 30 Index dropped by 1.6 per cent.
Investment analysts said the recovery at the stock market was significant considering the global economic outlook, the ravaging Coronavirus pandemic and crude oil price crash. Analysts said the positive curve at the stock market was a reaffirmation of confidence in the mid to long-term outlook of the Nigerian stocks.
“This week’s performance was surprising, given that risks remain on the horizon following the increasing number of COVID-19 cases in Nigeria. Nonetheless, we note that the market performance was buoyed by fundamentally justified stocks and therefore advise again, that investors trade cautiously,” Cordros Capital stated.
Afrinvest Securities said the rally at the stock market was driven by bargain-hunting as “investors took position in undervalued shares across sectors”.
“We expect performance in the coming week to be mixed,” Afrinvest Securities stated, in a cautionary note reflecting the uncertainties still around the market.
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President, Association for the Advancement of Rights of Nigerian Shareholders (AARNS), Dr Faruk Umar, said the rally might not be unconnected with improved investors’ confidence in Nigerian equities given the decision of quoted companies to conduct their annual general meetings by proxies, which would enable them to pay declared dividends to shareholders, rather than hiding on restrictions occasioned by Coronavirus pandemic.
“Part of the dividends would certainly go back to the market. Another reason could be the progress being made in tackling the Covid-19 as many people are being discharged and there seems to be some hope for early vaccine trial in China,” Umar said.
According to him, the decision of OPEC and some other oil producing countries to cut down oil production was also positive for the market while decline in domestic interest rate on treasury bills and other instrument as well as foreign exchange regulations by the Central Bank of Nigeria (CBN) were positive drivers for several undervalued stocks.
Chief Executive Officer, Sofunix Investment Communications, Mr Sola Oni, said the rally was due to some investors who were taking advantage of relatively low share prices of blue chips to beef up their portfolios.
“This may not be unconnected with the fact that many foreign portfolio investors that sold off have exhausted their sales. This is a good period for asset allocation and portfolio review.
The ongoing panic of COVID-19 and its likely negative impact in the future corporate earnings cannot discourage real investors from taking position. It is a matter of understanding market psychology,” Oni, a chartered stockbroker, said.
He however noted that “the dynamics of the market is that tough economic environment may soon propel some of those purchasing now to realise their profits through capital gains shortly and this can moderate the rising share prices”.
Total turnover of at the NSE stood at 1.50 billion shares worth N12.89 billion in 20,982 deals last week compared with 2.44 billion shares valued at N19.93 billion traded in 18,918 deals two weeks ago.
Sectoral analysis showed investors’ preference for sectors with stronger Covid-19 impact stimulus, including banking, healthcare and consumer goods. The Federal Government has announced major intervention supports for the healthcare sector while banking, healthcare and food companies were among exempted essential services during the lockdown.
The NSE Consumer Goods Index recorded the highest sectoral gain of 15.57 per cent for the week. The NSE Industrial Goods Index followed with average gain of 5.16 per cent. The NSE Banking Index appreciated by 4.73 per cent. The NSE Oil and Gas Index rose by 1.47 per cent while the NSE Insurance Index inched up by 0.83 per cent.
Financial services sector remained the most active with a turnover of 1.24 billion shares valued at N8.42 billion in 12,835 deals; representing 82.82 per cent and 65.33 per cent of the total equity turnover volume and value. The healthcare sector followed with 72.953 million shares worth N386.138 million in 465 deals while consumer goods sector placed third on the activities’ chart with a turnover of 48.567 million shares worth N1.904 billion in 2,611 deals.
Banking stocks were the most active stocks. The three most active stocks were Omoluabi Mortgage Bank Plc, FBN Holdings Plc and Zenith Bank Plc, which accounted for 755.1 million shares worth N4.58 billion in 5,758 deals, representing 50.5 per cent and 35.56 per cent of the total equity turnover volume and value.
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