New Telegraph

NSE hits N15trn in market capitalisation

…as investors gain N708bn, highest in five years

 

Thebullsyesterdaymaintained grip on market activities as stocks sustained rally for the 12th trading session to record highest gain in more than five years investors positioned to leverage undervalued stocks over decline in fixed income.

 

The Nigerian Stock Exchange All Share Index climbed 4.92 per cent, the highest gain since April 2015.

 

The benchmark had soared 13 per cent in the past month, more than any of the other 93 major global gauges tracked by Bloomberg, and is also the best-performing market in the world Tuesday. It’s on the longest winning run since July 2017.

 

Market capitalisation of equities appreciated by N708 billion to hit N15.110 trillion from N14.402 trillion as market sentiment remained on the green zone.Meanwhile, a turnover of 749.10 million shares exchanged in 8,075 deals was recorded in the day’s trading.

 

The premium sub-sector was the most active (measured by turnover volume); with 436.43 million shares exchanged by investors in 3,754 deals. Volume in the sub-sector was largely driven by activities in shares of Zenith Bank Plc and UBA Plc.

 

The banking sub-sector, boosted by activities in shares of Ecobank Plc and GTBank Plc, followed with a turnover of 97.1  million shares in 1,271 deals. According report by Bloomberg, local investors have flocked to the stock market in search for returns as yields on government debt dropped after a surprise September rate cut aimed at stimulating the economy in Africa’s largest oil producer.

 

Traders are homing in on Nigerian companies they expect will best overcome the onslaught of Covid- 19 and be able to distribute dividends to shareholders. “The low yield environment has directed some local institutional investors’ participation in the market, further aided by the relatively good corporate results and attractive valuations from some companies,” Lilian Olubi, chief executive officer of EFG Hermes Nigeria, said.

 

Market giant, Dangote Cement Plc, which climbed 9.9 per cent, MTN Nigerian Communications Plc, up 5.7 per cent, and Zenith Bank Plc, which gained 9.5 per cent, were the three biggest contributors to Tuesday’s advance. The gains over the past month have been limited to about a third of the benchmark index’s 153 members.

 

Gbolahan Ologunro, an analyst at CSL Stockbrokers, said the fragile state of the economy has caused investors to focus on stocks that have demonstrated resilience. “That is why the rally is not broad-based — few names across sectors have benefited from the rally,” said Ologunro.

 

This “trend is different from what is expected whenever the  is bullish,” he said. Fund managers have made the most of a bond rally this year driven by dovish central bank policy, said Omotola Abimbola of Chapel Hill Denham, but there is a sense that this trade is reaching its peak and the next asset to target is equities.

“Yields are very low in the fixed income market — the 30- year bond closed below nine per cent at the last auction and some blue-chip companies are trading at a 15 per cent dividend yield, so people are going to rotate into equities once again,” Abimbola said. The rapid run-up in Lagos stocks has sparked at least one warning signal: the 14-day relative strength index on the benchmark equity gauge has climbed above 96,

 

well above the level of 70 that signals to some technical analysts that the gains may be overdone and ripe for a correction. The market is looking the most overbought since August 2006.

 

The government last month announced the end of costly subsidies on electricity and gasoline, among the reforms needed to support the economy after the plunge in oil prices eroded the country’s biggest source of revenue.

 

Recent gains in Brent crude have also boosted sentiment toward a stock market that’s light on foreign involvement because of restrictions on hard-currency supplies, said Hasnain Malik, the Dubai-based head of equity strategy at Tellimer.

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