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Nigerian Stock Exchange gains N8.09trn in 2020

…closes year with N396bn gain
Local bourse is world’s best with 50% returns

The Nigerian stock market ended the year 2020 on an impressive note, as investors increased their buying pres-sure, especially on blue chip stocks. The equities benchmark index in Africa’s largest economy recorded its highest return, rising 50.02 per cent this year to become the world’s best performing stock market year-to-date.

The Nigerian stock market had closed negative during the first quarter of 2020 with a wobbling loss of about N1.858 trillion or 21 per cent. Low sentiment in the local bourse market had worsened following investment apathy which had made both foreign and local investors remain on the sidelines owing to upset in the financial market arising from the widespread of the COVID-19 pandemic and sharp drop in oil price.

However, the Nigerian Stock Exchange (NSE) bounced back at the second quarter with a gain of about N1.669 trillion or 15 per cent, maintained the uptrend at the third quarter with a gain of N985 billion and recorded the highest gain of the year in the fourth quarter with a gain of N7.302 trillion, hence a cumulative gain of N8.098 trillion.

Available statistics to New Telegraph showed that activities on the NSE, which opened the trading year at N12.958 trillion in market capitalisation and 26.842.07 in index at the beginning of trading on January 2, 2020, closed at the 31st December, 2020 at N21.056 trillion and 40,270.72 index points, hence has earned a year-to-date gain of about N8.098 trillion or 50.02 per cent.

Meanwhile, the equities market closed the last trading day of 2020 on a positive note as investors continue to take position on undervalued stocks and in anticipation of end of year dividend. The market performance indices, NSE ASI, appreciated by 1.92 per cent as market breadth, however, closed negative with 18 gainers against 24 losers. Consequently, the All- Share Index grew by 758.41 basis points or 1.92 per cent to 40,270.72 index points the previous day from 39,512.31, while the market capitalisation of equities appreciated by N396 billion to close at N21,056 trillion from N120.660 trillion. On the activity chart, the premium sub-sector dominated in volume terms with 265.34 million shares exchanged in 1,521 deals. The sub-sector was enhanced by activities in shares of Zenith Bank and Access Bank Plc. The insurance sub-sector boosted by activities on shares of AIICO Insurance Plc. and AXA-Mansard Plc., followed with 222.64 million units traded in 157 deals.

In all, investors exchanged a total of 710.71 million shares in 4,399 deals. Further analysis of the day’s trading showed that BOC Gases Nigeria Plc. led the gainers’ chart by 10 per cent to close at N9.57 per share while NNFM Plc.

followed with 9.95 per cent to close at N6.74 per share and C and I Leasing Plc. with a gain of 9.94 per cent to close at N5.20 per share. On the flip side, FTN Cocoa Plc. led the losers’ chart by 9.59 per cent to close at 66 kobo per share. Eterna Oil Plc. followed with a loss of 9.09 per cent to close at N5.10 per share while AIICO Insurance Plc. dropped by 8.87per cent to close at N1.13 per share.

The growth in market capitalization during the year was due to positive sentiment by investors following sustained activation of business continuity process and other innovations by the Securities and Exchange Commission (SEC) and the NSE amidst COVID-19 pandemic ravaging the country. Also the sharp drop in fixed income yields following further monetary easing by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) helped the market.

The MPC had voted to reduce the Monetary Policy Rate (MPR), from 12.5 per cent to 11.5 per cent. This was disclosed by CBN Governor, Godwin Emefiele, while reading the communiqué at the end of the MPC meeting recently. Market analysts believe the renewed sentiment in the local bourse market had also grown following crave to increase capital gains on the back of low prices of stocks owing to upset in the financial market arising from the widespread of the pandemic and sharp drop in oil price. Market observers agree that the decline witnessed in the Q1 that made prices of many stocks miserable attracted investors during the rest of the year.

The market capitalisation of the 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 yesterday’s 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 yearend 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.

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