Nigerian stocks played the contrarian in the mostly negative trading in global stock markets as increased optimism on the overall macroeconomic outlook and corporate earnings roused the Nigerian market to its first positive closing in recent weeks.
Benchmark indices for the stock market indicated average gain of 0.58 per cent at the weekend with turnover volume and value rising by 32.9 per cent and 94.1 per cent during the five-day trading week.
The All Share Index (ASI)- a common value-based index that tracks share prices at the Nigerian Stock Exchange (NSE), closed weekend at 24,427.73 points as against 24,287.66 points recorded as opening index for the week.
The ASI serves as national index to gauge the performance of the Nigerian stock market.
The performance of the market was the major silver lining in the global stocks markets as most advanced and emerging markets remained under pressure from frosty global relations, trade tensions, weak economic performance and COVID-19 pandemic.
In United States, Standard & Poors 500 Index, NASDAQ Index and Dow Jones Industrial Average (DJIA) Index declined by 0.2 per cent, 1.7 per cent and 0.1 per cent respectively. United Kingdom’s FTSE All Share Index posted a negative return of -2.0 per cent.
France’s CAC 40 Index declined by 2.1 per cent. Germany’s XETRA DAX Index dropped by 0.3 per cent.
Hong Kong’s Hang Seng Index declined by 1.5 per cent while China’s Shanghai Composite Index depreciated by 0.5 per cent.
Across Africa, most stock markets also closed negative with Egypt’s EGX 30 Index leading with a drop of 1.5 per cent. Kenya’s NSE 20 Index declined by 1.2 per cent. Mauritius’ SEMDEX Index dropped by 0.8 per cent. Morrocco’s Casablanca MASI Index and South Africa’s FTSE/JSE All Share Index dipped by 0.4 per cent each. Ghana meanwhile joined Nigeria on the positive side with modest gain of 0.1 per cent.
Japan made a lone appearance for the advanced economies with Nikkei 225 Index’s 0.2 per cent gain.
Senior Research Analyst, FXTM, Lukman Otunuga, attributed the recovery at the stock market to optimism that economy and corporate performance may pull through the COVID-19 pandemic better than predicted.
Market optimism was also boosted by a positive review by the Central Bank of Nigeria (CBN) on the economy and the banking sectors as well as early earnings reports by major listed companies, especially Dangote Cement Plc. Banks are the traditional drivers at the stock market with many banks paying interim dividends on half-year results.
Nigeria’s largest quoted company and Africa’s biggest cement producer, Dangote Cement Plc, at the weekend reported modest growth in profitability in the first half of 2020 with pre and post tax profits rising to N162.9 billion and N126.1 billion.
Dangote Cement had earlier indicated plan to buy back its shares amid general undervaluation of Nigerian stocks.
Total turnover at the NSE stood at 1.35 billion shares worth N14.433 billion in 16,723 deals last week as against 1.02 billion shares valued at N7.44 billion traded in 18,092 deals two weeks ago.
Market analysts remained generally cautious, although first half results are expected to shape the performance of the Nigerian stock market in the weeks ahead.
“Given the constant disruptions, chaos and economic instability caused by COVID-19, the outlook for Nigeria and many other emerging markets remains clouded by uncertainty,” Otunuga said.
“In the coming week, we expect more corporate earnings releases to dictate the performance of the market,” Afrinvest Securities stated.
Analysts at Cordros Capital maintained their call for cautious trading noting that the gains recorded last week were not broad-based.
“We reiterate that risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions.
Thus, we continue to advise investors to seek trading opportunities in only fundamentally justified stocks,” Cordros Capital stated.
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