Negative fixed income returns, bellwethers push NSE index by 2.53%

. As ASI erases year-to-date losses
As declining returns across fixed-income assets continue to buoy investors’ appetite in bellwether stocks, the All-share index (ASI), erased its year-to-date losses on Friday, appreciating by 2.53 per cent to close at 26,986.77 per cent last week.

This is despite the one-day holiday declared by the Federal Government on Thursday, October 1st to commemorate Nigeria’s 60th Independence anniversary.

Also, the market capitalisation of the Nigerian Stock Exchange (NSE) appreciated by 2.55 per cent to close the week N14.105 trillion. All other indices finished higher with the exception of NSE consumer goods, which depreciated by 0.75 per cent, while NSE ASeM Index closed flat.

Analysts linked the improved buying interest, and positive sentiments to Monetary Policy Committee (MPC) decisions to cut MPR from 12.5 per cent to 11.5 per cent, in addition to investors positioning ahead of the third quarter (Q3) numbers.

They expressed optimism that the trend would continue considering the quantum of funds flowing into equity assets due to the prevailing low interest rate and yields environment.

Analysts at Investdata Consulting Limited, said: “The recovery move of Nigeria’s stock market should not come as a surprise to many market players, given the preceding two years of down market that had been worsened by the outbreak of coronavirus pandemic that resulted in panic selloff in March, bringing the NSE index to its 11-year low.

“This naturally made stocks cheaper, grossly undervalued and attractive to discerning investors, who took advantage. In the process, September on the NSE changed from its tradition of being a month of sell market, as investors would normally seek funds to pay school fees for their children and wards.

“We see investors focusing on portfolio adjustment and rebalancing by targeting companies with strong potentials to grow their Q3 earnings and dividend on the strength of their earnings capacity as the year entered its last quarter to usher in 2021.”

Similarly, Codros Capital Limited said: “We expect the market might continue to benefit as domestic investors seek alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market. However, we advise investors to trade in only fundamentally justified stocks as the weak macro environment remains a significant headwind for listed companies.”

A look at stock market performance last week showed that transactions on the equities sector of the NSE, reopened upbeat on Monday, as more high capital stocks joined the league of gainers, resulting in a further rise in market capitalisation by N98 billion.

The ASI rose 188.50 absolute points or 0.72 per cent to close at 26,507.84 points. Similarly, the overall market capitalisation gained N98 billion to close at N13.853 trillion.

The upturn was impacted by gains recorded in large and medium value stocks, including Total Nigeria, MTN Nigeria Communications (MTNN), Okomu Oil, BUA Cement, and Lafarge Africa.

On the market performance, United Capital Plc, said: “Going forward, we expect to see the bullish sentiment sustained in the equities market on the back of elevated financial system liquidity as well as the continuously declining returns in the fixed income market and limited investment outlets.

As such, we advise investors to take positions on high quality dividend paying stocks.

“On Tuesday, sustained appetite in the shares of most highly capitalised stocks lifted transactions on the equity sector of the NSE, as the ASI increased further by 0.39 per cent.

At the close of trading, the ASI rose by 104.12 absolute points, a 0.39 per cent growth to close at 26,611.96 points. Similarly, the overall market capitalisation gained N55 billion to close at N13.908 trillion.

The upturn was impacted by gains recorded in large and medium capitalised stocks, including Seplat, BUA Cement, MTN Nigeria Communications, Dangote Sugar Refinery, and Zenith Bank.

The NSE market capitalisation closed trading for the month of September at N14 trillion on Wednesday, amid sustained bargain-hunting activity.

The ASI rose 201.80 absolute points, a 0.76 per cent growth to close at 26,813.76 points.

Similarly, the overall market capitalisation gained N117 billion, or 0.84 per cent to close at N14.025 trillion.

The difference in the indices is as a result of Dangote Sugar Refinery Plc listing an additional 146.88 million ordinary shares on the NSE’s daily official list.

The upturn was impacted by gains recorded in large and medium capital stocks, including Total Nigeria, Dangote Cement, MTN Nigeria Communications, Guaranty Trust Bank, and UAC of Nigeria (UACN).

Analysts at Afrinvest Limited, said: “We remain optimistic about a sustained bullish run as we approach earnings season.”

Further analysis of last week’s trading showed that a turnover of 1.532 billion shares worth N16.901 billion was recorded in 17,882 deals by investors on the floor of the Exchange, in contrast to a total of 1.567 billion shares valued at N20.559 billion that changed hands in 18,396 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 1.292 billion shares valued at N10.562 billion traded in 10,046 deals; thus contributing 84.29 per cent, and 62.49 per cent to the total equity turnover volume and value, respectively.

The conglomerates industry followed with 62.395 million shares worth N89.205 million in 453 deals. The third place was the industrial goods industry with a turnover of 55.168 million shares worth N2.976 billion in 1,752 deals.

Trading in top three equities namely, Zenith Bank Plc., Sterling Bank Plc. and United Bank for Africa Plc. (measured by volume) accounted for 815.646 million shares worth N7.311 billion in 4,461 deals, contributing 53.22 per cent to the total equity turnover volume.

About 36 equities appreciated in price during the week, higher than 35 in the previous week, while 15 depreciated in price, lower than 28 equities in the previous week. Also, 112 equities remained unchanged, higher than the 100 recorded in the previous week.

A total of 103,480 units of bonds, valued at N123.507 million were traded in 24 deals last week, compared with a total of 467 units worth N564.073.49 transacted in five deals during the preceding week.