By Chinwendu Obienyi
Despite Nigeria’s weakening economy and apprehension that COVID-19 pandemic might undermine profitability of quoted companies on the Nigerian Exchange Limited (NGX)’s platform, investors still pocketed about N418billion gains in April 2021.
The NGX had suffered losses in February and March due to sell pressure in bellwether stocks as investor’ preferences shifted to fixed income market in response to a sudden increase in yields on treasury bills.
However, when companies began to release their 2020 full year results and showing unexpected impressive performances, many investors realised that the balance sheets of the companies withstood the devastation of COVID-19 pandemic.
Daily Sun analysis, revealed that a total of over N900 billion was paid out as dividend to shareholders as against N852 billion recorded in 2019. With that in mind, the stock market went into a reverse mode with investors (particularly domestic stakeholders) raising their appetite for stocks.
Consequently, at the close of transactions in the month under review, the NGX’s market capitalisation rose by N418 billion from the opening value of N20.429 trillion to N20.847 trillion.
Similarly, the NGX All-Share Index (ASI) rose by 2.0 per cent from 39,045.13 to 39,834.42 points, resulting in an improvement on the 1.9 per cent decline recorded in March.
Although, May transactions have been somewhat mixed due to the Bear and Bull tussle, analysts say bearish sentiment might regain dominance while the rising yield in the fixed income market, might reduce investor’ exposure to equities, a phenomenon that may reflect the moderating risk appetite of both retail and institutional investors.
Speaking to Daily Sun via a telephone chat, the Managing Director, Crane Securities, Mike Eze, noted that the performance of the market in April was exceptional as investors positioned themselves for dividends which gave rise to the gain in market capitalisation.
Eze said that the surprisingly good full-year results released by several companies boosted investor’ confidence to realise that the balance sheet of most companies withstood the devastation of COVID-19.
According to him, the heightened insecurity that brought the economy to a standstill did not, in general, affect the bottom line of most companies.“Firstly, we have seen these companies make profit and even recommend dividends to shareholders. This is an obvious sign that will necessarily increase the confidence of investors to likely trade in equities despite the increased yield in fixed income instruments.