Due to strong rally of some stocks, transactions on the floor of the Nigerian Stock Exchange (NSE) ended January on a high note, as the market recorded a whopping 9.877 billion shares worth N129.63 billion.
This was even as the market capitalisation rose by N1.89 trillion from N12.970 trillion at the start of transactions this year to N14.857 trillion at the close of proceedings on Jan 31, 2020.
The stock market had performed poorly, declining by 14.6 per cent in 2019, a performance which had stakeholders projecting that investors would recoup their losses.
True to expectations, the market started the year on a bullish note with the All-Share Index (ASI) and market capitalisation peaking at 29,710.56 points and N15.304 trillion respectively on January 20. This could be attributed to the listing of BUA Cement on the bourse during the month.
However, the market began to decline in the last week of January as some investors embarked on profit-taking, coupled with negative reactions that greeted the mixed earnings reported by some companies in their 2019 full-year interim results as well as the Coronavirus spooking the global markets, especially China.
Despite witnessing five days of negative performance, the market still ended January with a gain of N1.89 trillion while the ASI up by 7.5 per cent, from 26,842.07 to 28,843.53 points.
Further analysis showed that the overall market performance in the month under review was driven largely by gains recorded in the industrial goods and financial services sectors. The NSE Industrial Goods Index posted above average return of 14.39 per cent, the NSE Insurance Index appreciated by 4.91 per cent, the NSE Banking Index rose by 4.75 per cent while the NSE 30 Index, which tracks the 30 largest stocks at the NSE, appreciated by 8.25 per cent.
On the flipside, the NSE Consumer Goods Index and NSE Oil and Gas Index however depreciated by 5.79 per cent and 4.19 per cent respectively.
Most analysts remained cautious about the short-term outlook for Nigerian equities, after the two-year consecutive decline.
Managing Director, Afrinvest Securities limited, Ayodeji Ebo, while fielding questions from newsmen during the launch of Afrinvest’s Economic and Financial Markets Outlook 2020, titled, “Nothing Ventured, Nothing gained”, said, the performance of the stock market is projected based on low fixed income yield environment both locally and globally, unorthodox domestic monetary and clear fiscal policies, improved corporate performance, new listings and recapitalisation exercise.
He said, “If the macro-economic landscape is better with aforementioned, then the market might record 13.3 per cent growth in our base case scenario”.
Analysts at United Capital Plc, in its 2020 economic outlook report titled “A Different Playing Field”, projected that Nigerian equities may deliver a modest average return of some 5.3 per cent in 2020, although the overall market outlook remains susceptible to external shocks and domestic policies.
According to the report, the continued auction of high yield Open Market Operation (OMO) bills to foreign portfolio investors (FPIs) may keep foreign interest in local equity market tepid amid fears of a naira devaluation and confidence deficit in the economy.
The report noted that FPIs are likely to continue their flight to safety by swapping or selling equities for low-risk OMO bills pointing out that the outlook for stocks in 2020 was anchored on developments in the domestic and global economy with monetary policy as the biggest factor to watch.