Investors’ bargaining upped equities’ gain in January

As smart investors took strategic positioning in anticipation of high dividend and possible bonus declaration by quoted companies, Nigeria’s equities market inched up, closing the trading session for January on a positive note.

Index movement showed that the Nigerian Stock Exchange All-Share Index and market capitalisation grew by 5.3 per cent year-to-date amid a triggered investors’ sentiment with sustained bullish activity.

The NSE ASI moved from 40,270.72 points it opened trading to close at 42,412.66 points on the last trading day of the month, while the market cap rose from N21.06tn to close at N22.19tn.

The last trading week signalled a mixed reaction to unaudited fourth quarter 2020 earnings releases of corporate entities, as equities market advanced by 0.58 per cent to record the fifth straight weekly gain.

Analysts from Cowry Asset Management attributed this sentiment to the decision of the Central Bank of Nigeria’s Monetary Policy Committee to hold all key rates which ignited the risk-on sentiments of investors as they hunt for bargains in the market.

Similarly, the NSE ASI and market cap appreciated by 2.63 per cent at the close of the second-week trading session, while the NSE ASI posted 41,176.14 points, the market cap stood at N21.53tn.

However, the NSE ASI and market cap depreciated by 0.37 per cent in the first week of January to close at 40,120.22 points and N20.978tn. In the same vein, the market depreciated by 0.42 per cent and 0.38 per cent to close the third-week trading session at 41,001.99 points and N21.45tn, respectively.

Despite Nigeria meandering into a recession after the country’s gross domestic product moderated -6.10 per cent and -3.62 per cent in the second and third quarters of 2020, the NSE ASI grew by +50.3 per cent year-to-date in 2020, to place the NSE as the highest yielding market in Africa in 2020.

In reviewing market performance for last year, the Chief Executive Officer of the NSE, Oscar Onyema, said, “The year 2020 was indeed a historic one for global capital markets. Facing buffeting headwinds, world markets saw sharp swings and steep losses but largely remained resilient and orderly amid rising uncertainty.”

He explained that for the NSE, renewed investor optimism coupled with improved economic conditions and low fixed income yields propelled a year-end bull run. 

“Of 93 global equity indices tracked by Bloomberg, the NSE All-Share Index emerged as the best-performing index in the world, surpassing the S&P 500 (+16.26 per cent), Dow Jones Industrial Index (+7.25 per cent), and other global and African market indexes, to post a one-year return of +50.03per cent,” Onyema noted.

Looking ahead to 2021 and expert predictions for the Nigerian capital market, the NSE boss, while giving a review of market performance and outlook for the new year, had recently stated that the year has started on a positive note as the ASI already returned 2.0 per cent after 11 trading sessions. 

“We expect the marginal reopening of businesses, normalisation of the economy, and revenue-diversification drive of the Nigerian government to elicit positive sentiments throughout the year.

“Our growth expectations should be noted with caution, as the recent second wave of COVID-19 in Nigeria and globally, may slow down renewed social and economic activities,” he added.

Moreover, an investment and portfolio analyst, Abel Ezekiel, told Financial Street that the NSE ASI had closed positive in January owing to a number of factors.

“The market ended last year as the market equity for the whole world notching over 50 per cent gain and index closing in 40,000 index, the same pattern is being witnessed in the first month of the year and surely we expect this positive momentum to be maintain in course of the year from short to medium time frame,” Ezekiel said.

He also highlighted inflationary pressure on the micro economic level caused by naira devaluation to have made the equity prices near to zero kobo, pointing out that the CBN’s policies of lowering yield on treasury bills, bonds and other fixed income segments of the financial markets, where investors currently earn less than two per cent per annum on deposit and other short to long tenor end assets, also contributed to the market closing the month in green.

“This is the last quarter for most quoted companies to send their full year financial report to the market so naturally smart investors take strategic positioning in some of this company in anticipation of good dividend and possible bonus declaration,” the analyst added

Meanwhile, last week’s index movement saw the market indices advance as a total share of 2.570bn valued at N27.88bn was traded in the week ending January 29, 2021.

Top three gainers were Champion Breweries Plc, which rose by 59.49 per cent; Fidson Healthcare Plc, which gained 30 per cent and May & Baker Nigeria Plc, which gained 27.40 per cent.

On the contrary, Veritas Kapital Assurance Plc lost 28.57 per cent, Sovereign Trust Insurance Plc, 21.21 per cent and Academy Press Plc, 17.50 per cent to top the losers’ chart.

The market printed 41 gainers as against 34 losers which shares depreciated in price as the market recorded a positive breath.

“In the new week (first week of February), we expect the local equities market to further trade northwards as investors tweak their portfolios in favour of shares of companies with good dividend payment history and which present relatively higher yields,” analysts from Cowry Asset Management forecast.

Ehime Alex
Ehime Alex
Ehime Alex reports the Capital Market, Energy, and ICT. He is a skilled webmaster and digital media enthusiast.

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