- UBA, GTCO, Access Holdings lead
Nigerian equities continued on their bullish run as more investors staked on optimism that the new government’s pro-market policies would lead to significant improvements in the economic outlook.
Benchmark indices for the Nigerian equities at the weekend indicated average gain of 5.49 per cent during the week, equivalent to net capital gain of N1.67 trillion.
With more than three advancers for every decliner, the performance at the stock market continued on the same strong momentum and widespread positive sentiments, triggered by the May 29 inaugural address of President Bola Tinubu.
The All Share Index (ASI)- the value-based common index that tracks all share prices at the Nigerian Exchange (NGX), closed weekend at 59,000.96 points as against the week’s opening index of 55,930.97 points. Aggregate market value of all quoted equities at the NGX also rose correspondingly from the week’s opening value of N30.455 trillion to close weekend at N32.126 trillion, representing an increase of N1.67 trillion.
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The momentum also increased considerably with a total turnover of 4.276 billion shares worth N62.176 billion in 44,344 deals as against a total of 2.196 billion shares valued at N45.971 billion traded in 31,655 deals two weeks ago.
Investors showed strong appetite for banking stocks. Trading in the trio of United Bank for Africa Plc, Guaranty Trust Holding Company Plc and Access Holdings Plc accounted for 1.475 billion shares worth N27.648 billion in 8,875 deals, contributing 34.50 per cent and 44.47 per cent of the total equity turnover volume and value respectively.
The financial services industry led the activity chart with 3.303 billion shares valued at N45.244 billion traded in 23,490 deals; thus contributing 77.26 per cent and 72.77 per cent to the total equity turnover volume and value respectively. The oil and gas industry followed with 247.383 million shares worth N2.368 billion in 3,561 deals. The third place was occupied by the consumer goods industry, with a turnover of 223.315 million shares worth N4.640 billion in 5,982 deals.
There were 77 gainers to 24 losers last week as against 52 gainers and 27 losers recorded in the previous week. FTN Cocoa Processors led the gainers with a gain of 45.16 per cent to close at N1.35. Unity Bank followed with a gain of 41.67 per cent to close at N1.02 while Coronation Insurance rose by 40.43 per cent to close at 66 kobo.
Most analysts have expressed optimism on the outlook for Nigerian stock market, citing the macroeconomic reforms by the new administration.
Afrinvest Securities at the weekend stated that it expected the bullish run to continue.
Managing Director, Arthur Stevens Asset Management, Mr. Olatunde Amolegbe said the pronouncements by the president were “extremely important” to the capital market, noting that “they will impact the economy and the investment market in the short to medium term if implemented as mentioned”.
“The President has hit the ground running. If you are holding fixed income securities at present rates, you better consider holding on to them. We expect influx of foreign portfolio investors into the stock market now that the coast seems clear. So, a bull run might not be far behind. This will be interesting times,” Amolegbe, a former president of Chartered Institute of Stockbrokers (CIS), said.
Cordros Capital, in its review, stated that it believed that the exchange rate unification was a very good initiative to pursue, which should essentially see the official and unofficial exchange rates eventually trade within a close margin which is considered to be optimal, holding forex liquidity constant.
Analysts noted that there might be some panic selling in the near term at the unofficial market, leading to some appreciation of the local currency at the parallel market, but if the official exchange rate is eventually realigned, the exchange rate would depreciate again at the unofficial market, if there are no immediate plans to drive forex inflows.
In essence, what then happens afterwards in terms of forex supply will determine how the exchange rate dynamics in the unofficial forex markets play out. Overall, analysts expected volatility in the forex market until the coast is clear on forex supply after the official exchange rate is realigned.
“We also like the PMS subsidy removal given that subsidy removal frees up government resources for other productive uses. Indeed, the President stated that his administration shall re-channel the funds into better investments in public infrastructure, education, healthcare and jobs that will materially improve the lives of the average citizen. Also, given the potential positive impact of PMS subsidy removal on government revenue, we expect to see an improvement in the debt-service-to-revenue ratio, which was 89.5 per cent as at November 2022. Fiscal deficits are also likely to reduce over time if aggregate expenditure does not grow more than the increase in revenue,” Cordros Capital stated.
Analysts at Cordros Capital were however cautious about the possibility of low interest rates regime now.
“While some individuals can find logic in reducing interest rates, for now, we think it will be disastrous when activities eventually normalise. Thus, we think the statement suggests a preference for low interest rates even when low rates are not warranted, likely leading to capital outflows, exchange rate pressures, and worsening inflationary pressures. Perhaps, the country might end up with interest rate bifurcation such that interest rates for government securities are low but private sector lending rates are high,” Cordros Capital stated.