Anticipated improved corporate performance lifts NSE indices by 3.4%

NSE trading floor. PHOTO: FEMI ADEBESIN-KUTI

By Helen Oji
Expectations of improved corporate earnings, coupled with the outcome of the MPC meeting sustained positive sentiments on the equity sector of the Nigerian Stock Exchange (NSE) last week, as the market hit the N22 trillion mark, and the All-share index and market capitalisation appreciating by 3.442 per cent to close the week at 42,412.66 and N22.187 trillion, respectively.

Similarly, all other indices finished higher with the exception of NSE Oil/Gas ,which depreciated by 7.25 per cent while the NSE ASeM and NSE growth indices closed flat.

Analysts said the gradual release of corporate earnings spurred buying interests in dividend-paying stocks, which was further strengthened by the outcome of the MPC meeting.

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The Chief Research Officer at Investdata Consulting, Ambrose Omordion, said: “The market finally broke out of the 42,000 psychological line, helped by the influx of unaudited corporate earnings offering an insight into what investors should expect from the 2020 December year-end audited earnings reports.

“This is in the midst of positive sentiments that have been helped by the decision of the Central Bank of Nigeria Monetary Policy Committee (MPC) to leave rates unchanged, following which funds continue to enter the market, as indicated by money flow index and sentiment report.

“Consequently, we advise that players should take advantage of breakouts to position in dividend-paying stocks, with numbers likely to beat expectations, given that the factors driving the rally remain intact. We note too that trading patterns are supporting mispriced stocks and high yield dividend-paying companies. However, let us not forget that profit taking and price correction are integral parts of stock market investing or trading.”

Analysts at Codros Capital also said: “With the outcome of the MPC meeting aligning with market expectations amid negative real returns in the fixed income market, we expect risk-averse investors to recalibrate their portfolio towards fundamentally sound stocks with attractive dividend yields.

“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.”

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A breakdown of the market performance last week showed that transactions on the equity sector of the Nigerian Stock Exchange (NSE) reopened upbeat on Monday, occasioned by bargain-hunting in some high capital stocks. The market capitalisation appreciated by N45 billion and the All-Share Index (ASI) grew by 86.97 absolute points or 0.21 per cent increase to close at 41,088.96 points. Also, the overall market capitalisation gained N45 billion to close at N21.494 trillion.

The market gain was driven by price appreciation in large and medium value stocks including Airtel Africa, Dangote Cement, MRS Oil Nigeria, Julius Berger, and Lafarge Africa.

Transactions on the NSE sustained a rising profile on Tuesday, causing market capitalisation to rise further by N260 billion. Consequently, the ASI appreciated by 495.98 absolute points, or 1.21 per cent increase to close at 41,584.94 points. Also, the overall market capitalisation gained N260 billion to close at N21.754 trillion.

The uptrend was driven by price appreciation in large and medium capital stocks, including Airtel Africa, Flour Mills of Nigeria, Lafarge Africa, MTN Nigeria Communications, and Fidson Healthcare.

Trading on the bourse sustained the rally for the third consecutive day, as more blue-chip stocks joined the league of gainers, causing investors wealth to soar by N440 billion in three trading days.

The market capitalisation of listed equities, which opened at N21.494 trillion on Monday, rose by N440 billion to close at N21.934 trillion. The ASI grew by 841.77 points, a 2.0 per cent increase from 41,088.96 to 41,930.73.

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Wednesday’s upturn was driven by price appreciation in large and medium capital stocks including, Airtel Africa, MTN Nigeria Communications (MTNN), Lafarge Africa, Julius Berger, and Fidson Healthcare.

Analysts Cordros Capital Limited said: “Pre-MPC meeting, we observed that the upward re-pricing of yields on long-dated bonds triggered reduced appetite for equities among domestic institutional investors.

“With the MPC maintaining the ‘lower-for-longer’ theme for rates, we expect a positive reaction in the equities market. Accordingly, we expect risk-averse investors to recalibrate their portfolio towards fundamentally sound stocks with attractive dividend yields.”
Sentiment, as measured by market breadth, was positive, as 35 stocks gained, relative to 21 losers.

Following sustained bargain-hunting in most blue-chip stocks, transactions at the NSE continued upbeat, as market capitalisation of listed equities hit N22 trillion mark on Thursday.

The ASI grew by 238.68 absolute points or 0.57 per cent rise to close at 42,169.41 points. Also, the overall market capitalisation gained N125 billion to close at N22.059 trillion.

The gain was driven by price appreciation in large and medium value including Stanbic IBTC Holdings, Julius Berger, Nigerian Breweries, Zenith Bank, and Guaranty Trust Bank.

A turnover of 2.570 billion shares worth N27.884 billion in 31,466 deals were traded last week by investors on the floor of the Exchange, in contrast to the 4.288 billion shares valued at N25.989 billion that exchanged hands a week earlier in 32,849 deals.

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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 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. The third place was consumer goods Industry, with a turnover of 220.759 million shares worth N3.953 billion in 5,952 deals.

Trading in 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% to the total equity turnover.

About 262,345 units valued at N2.279 billion were traded this week in 61 deals compared with a total of 778,755 units valued at N4.575 billion transacted last week in 46 deals.

A total of 20,510 units of bonds valued at N22.187 million were traded last week in 17 deals compared with a total of 2,515 units valued at N2.606 million transacted in 16 deals.

About 34 equities depreciated in price, higher than 29 equities in the previous week, while 86 equities remained unchanged, higher than 79 recorded in the previous week.