New Telegraph

NSE: Investors gain N674bn in 2 months

• Corporate earnings spur positive sentiments

 

Shareholders in quoted firms listed on the floor of the Nigerian Exchange Limited (NGX) realised a gain of N674 billion during the last two months (July and August 2021) as investors continue to increase their buying pressure, especially on blue-chip stocks. Positive sentiments had returned to the local bourse as the release of H1 corporate earnings bolstered buying interests in dividend-paying stocks.

 

Statistics made available to New Telegraph showed that activities on the NGX, which opened the trading month at N19.760 trillion in market capitalisation and 37.907.28 in index at the beginning of trading on July 1, 2021, closed at N20.434 trillion in market capitalisation and 39,219.61 in index points on August 31, 2021, thus earning about N674 billion or 3.46 per cent for the last two months.

Market analysts believe renewed sentiments in the local bourse 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 Coronavirus pandemic and sharp drop in oil price. Sequel to the point, some corporate earnings improved in some sectors of the market, especially the banking sector.

 

Analysts also believe that the release of more results and macroeconomic data are likely to trigger more buying interests, especially for banking stocks, if the numbers beats expectations. Some of the macroeconomic data, such as Consumer Price Index (CPI), second quarter Gross Domestic Product (GDP), among others, are expected to impact on the direction of the market.

 

Analysts at Cordros Capital said, in the banking sector, key players demonstrated a commendable level of resilience, despite the peculiar circumstances of the relatively weak and riskier environment and increasingly tight liquidity positions.

 

“We expect a combination of improved fixed-income yields and relatively stronger risk asset creation, FX revaluation gains from the adoption of the I&E window rate, and strong balance sheet management to support performance for the financial period,” they said.

 

They noted that considering the peculiarity of last year, both global and local banks were largely conservative in risk asset creation following the increased risks from the weakened economic and business environments.

 

“However, there has been an improvement in risk asset creation as reflected in the increased credit to the private sector – up 10.1 per cent y/y to NGN31.82 trillion in April 2021, according to the Central Bank of Nigeria. Total loans to the private sector advanced by 4.4 per cent q/q in Q1-2021 and 12.0 percent y/y.

 

“Understandably, some caution is still being exercised in ramping up risk assets considering the overall risk environment, especially in the absence of the regulatory forbearances on loans that moderated the impact of the pandemic on asset quality last year (non-performing loans as at FY-2020: 4.7 per cent vs FY2019: 5.5 per cent).

 

“A clearer representation of the admonitory note surrounding the lingering effects of the pandemic is reflected in the cost of risk, which remained flat (at 0.7 per cent y/y in Q1-2021) despite an increase in total loans, therefore highlighting the higher impairment charges recorded,” the analysts noted.

 

“In contrast to last year, we expect loan write-offs and restructuring to reflect current realities better. Consequently, we expect NPLs to edge higher by FY-2021 as already indicated (Q1-2021: 4.8 per cent; FY-2020: 4.7 per cent).

 

“However, as risk asset creation accelerates at a faster pace in the medium term, we expect that players’ ability to defend their asset quality would stem from tilting weights in the portfolio book to prioritise sub-sectors like telecommunications, transportation, and agriculture that have remained resilient amid the tepid recovery conditions,” they added

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