Income volatility, Q3 earnings lift NSE index further by 5.30%

 

By Helen Oji

 Profit-taking towards the end of the week, the crash in money market rates, and investors repositioning ahead of the Q3 corporate earnings season triggered increased buying interests on the equities sector of the Nigerian Stock Exchange (NSE).

At the close of transactions last week, the All-Share Index (ASI), and market capitalisation appreciated by 5.30% to close the week at 28,415.31 points and N14.852 trillion, respectively.

[AD]

All other indices finished higher with the exception of the NSE ASeM Index which closed flat.

Analysts explained that investors were attracted by the currently low market valuation amid the continued low-yield environment in the fixed income space.

According to them, the performance also reflects an improvement in risk appetite despite looming uncertainty surrounding the business terrain due to the pandemic.

However, they predicted a bearish outlook this week, amid continued profit-taking activities.

For instance, analysts at Afrinvest said: “While we expect the soft gains in the domestic market to be sustained, we note that investors are likely to extend the profit-taking activities into the week ahead. Hence, we maintain a bearish outlook.”

Codros Capital 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 review of market performance last week showed that the NSE continued in an upward note on Monday, even as more high capital stocks appreciated in price, causing the market capitalisation to increase further by N297 billion.

The All-Share Index (ASI), rose by 568.72 points, a 2.11 growth per cent to close at 27,554.49 points. Similarly, the overall market capitalisation gained N297 billion to close at N14.402 trillion.

The upturn was impacted by gains recorded in large value stocks, including Airtel Africa, SEPLAT Petroleum Development Company, MTN Nigeria Communications (MTNN), Presco, and Guinness Nigeria.

United Capital Plc had predicted that the bullish sentiment in the equities market will persist given the expected increased liquidity, limited outlets, and the cheap valuation in the stock market.

Also, analysts at APT Securities and Funds Limited said: “With money market interest rates at historical lows, investors had limited options to place funds in equities giving rise to inflows from local Investors, which is the major driver for the stock market performance in recent times.”

On Tuesday, the NSE market capitalisation hit the N15 trillion mark, as investors jostled for higher capital stocks, amid expectation of market rebound.

At the close of trading on Tuesday, market capitalisation rose by N708 billion from N14.402 trillion on Monday to N15.110 trillion within a few hours after trading commenced.

Also, the volume of shares traded soared significantly, as investors traded 749.468 million shares valued at N9.495 billion in 8,075 deals. The price movement chart showed that Dangote Cement emerged as the highest price gainer with N14.2 or 9.86 per cent to close at N158.20 per unit share.

This was followed by MTN Nigeria’s 3.70 per cent profit to settle at N140 per unit share. Nigeria Breweries, Stanbic and Zenith Bank followed with N3.5 (7.17 per cent), N2 (4.94 per cent), and N1.7 (8.95 per cent) to close at N52.3, N42.5, and N20.7, respectively.