Business

Bank stocks: Investors gain N225bn in 2020

Shareholders in banks quoted on the main and premium boards of the nation’s stock market reported a cumulative gain of about N225 billion during the financial year ended December 31, 2020 following positive market sentiments the local bourse witnessed towards the end of the year. Checks by New Telegraph revealed that the stocks recorded gain of N225 billion or 8.82 per cent to close at N2.777trillion in market capitalisation on the last trading day of the year as against opening figure of N2.552 trillion at the beginning of trading on January 2, 2020.

The market capitalisation of the Nigerian Stock Nigerian (NSE), which is the total value of all listed equities, had last week hit a historic peak of crossing N20 trillion, as investors increased demand for stocks to reposition for year-end seasonal trends and the much expected economic recovery in 2021.

This is the highest the market would record since 2008 when it peaked at N12.3 trillion before the meltdown. That meltdown brought the market value to about N6 trillion before it started recovery in later years. However, the listing of Dangote Cement Plc in 2010 significantly lifted the market.

The listing of MTN Nigeria Plc, Airtel Africa Plc last year and BUA Cement Plc early this year added more boost to capitalisation of the exchange, which set the pace for the historic peak. According to analysts at Greenwich Trust Research, “the market will likely remain upbeat buoyed by end-of-year portfolio re-balancing by fund managers, or even the “Santa-Rally”. We, however, do not rule out intermittent profit-taking that could slow down the uptrend in the market.”

Similarly, analysts at Cordros Research said, in the short term, they still see scope for expansion in valuation multiples as the hunt for alpha-yielding opportunities, in the face of increasingly negative real returns in the fixed income market, remains positive for stocks. Analysts at InvestData Consulting said there have been positive sentiments for value, growth and highly capitalised stocks with attractive valuation, as investors reposition for year-end seasonal trends and the much expected economic recovery in 2021. “The bull run shows that smart money is still in the market.

The ongoing Santa Claus rally is attributed to window dressing for year-end among institutional investors, even as bonuses are entering the market ahead of the New Year, as some investors are taking advantage of the tax code by selling positions they have taken losses at the end of December to buy-back in January,” they said. The analysts said although the inflationary trend remained a source of serious concern across the country, the equities market has so far provided a safe haven, with the NSE ASI returning 44.7 per cent year-to-date, remaining the only investment window that has outperformed inflation.

“The news of the Federal Government ordering the reopening of the nation’s borders is expected to add more momentum to factors driving the equity prices, going forward. “Such factors, including the high liquidity in the system, low yields environment in the fixed income market, uptrend in oil price, the discovery of a vaccine for COVID-19, and the expected early passage of the 2021 budget have supported the positive sentiment in the market so far,” InvestDat said.

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