by Chinwendu Obienyi
Amid dampened optimism for improvement in global output recovery, the resurgence of the COVID-19 pandemic and mild success with vaccinations across several countries, the Nigerian Stock Exchange (NSE) emerged the best performing stock exchange in Africa after closing the month of January 2021 in positive territory.
According to Bloomberg World Equities Index ranking which was released at the weekend, the NSE in USD terms (+7.10 per cent) ranked 6th as SRI Lanka Colombo, ADX General Index, MSE Top 20, SOFIX Index, DFM General Index ranked first, second, third, fourth and fifth respectively.
This was even as investors trading on the floor of the NSE, smiled home with a gain of N1.13 trillion as market capitalisation closed the month under review at N22.186 trillion from an opening value of N21.056 trillion.
Daily Sun analysis revealed that the market had started the year with bullish sentiments on the back of its golden foray in 2020 as the All Share Index (ASI) garnered 2.18 per cent or 41.147.39 points from an opening value of 40,270.72 points as at January 4, 2021.
Further analysis revealed that investors continued to remain cautious, while picking up stocks with good fundamentals and profitability and as at January 29, 2021, the market’s year-to-date (ytd) return improved to 5.32 per cent due to the gradual release of corporate earnings which bolstered buying interests in dividend-paying stocks.
Furthermore, market capitalisation which opened the year at N21.056 trillion, closed the month under review at N22.186 trillion, resulting in a gain of N1.13 trillion. According to market analysts, the positive performance was further strengthened by the outcome of the Monetary Policy Committee (MPC) meeting which reinforced the theme of “lower for longer” yields in the fixed income market.
Analysts at Cordros capital, an investment and research based firm, said that with the outcome of the MPC meeting aligning with market expectations amid negative real returns in the fixed income market, they expect risk-averse investors to recalibrate their portfolio towards fundamentally sound stocks with attractive dividend yields.
“With the MPC maintaining the “lower-for-longer” theme for rates, we expected a positive reaction and got a reaction from the equities market. We now expect investors’ attention to be focused on bond auction results. However, we advise investors to take positions in only fundamentally justified stocks as the fragility of the macroeconomic environment remains a significant headwind for corporate earnings”, they said.
For their part, Afrinvest said, they believed that the MPC decision was positive and much in line with its view as an extension of the current monetary easing which would be supportive of the expected recovery in the domestic economy.
“We believe this provides clarity for the market and should drive increased activities in the equities market while we expect fixed income traders to remain active at the short end of the market. In the coming week, we expect to see slight profit-taking at the start of the week. However, we envisage market performance will be dictated by the performance of the earnings results”, the investment and research based company said.
Meanwhile, a total turnover of 2.570 billion shares worth N27.884 billion in 31,466 deals were traded during the week by investors in contrast to a total of 4.288 billion shares valued at N25.989 billion that exchanged hands in the previous week in 32,849 deals.
The financial services industry (measured by volume) led the activity chart with 1.497 billion shares valued at N12.695 billion traded in 14,324 deals; thus contributing 58.22 and 45.53 per cent to the total equity turnover volume and value respectively.
The conglomerates industry followed with 363.263 million shares worth N821.428 million in 1,722 deals while the consumer goods industry, with a turnover of 220.759 million shares worth N3.953 billion in 5,952 deals.
Trading in the top three equities namely Transnational Corporation of Nigeria, Union Bank of Nigeria Plc and Zenith Bank Plc (measured by volume) accounted for 633.261 million shares worth N5.634 billion in 3,947 deals, contributing 24.64 and 20.20 per cent to the total equity turnover volume and value respectively.