(Sundiata Finance) – Stocks listed in the banking and pension sectors of the Nigerian Stock Exchange (NSE) outperformed the stock market in the first nine months of the year.
Banking stocks were up by 47 per cent, while pension stocks were up by 41 per cent within the period, to outperform the NSE’s All Share Index (ASI) which was up by 28 per cent in the same period.
This shows that investors, on the average, made more money from banking and pension stocks, than other equities within the period.
The NSE banking index, which stood at 26,874.62 basis points by December 31, 2016 closed on September 29, 2017, the last trading day of the third quarter, at 35,439.98 basis points, and that translated to a gain of 8,565.36 basis points within nine months. Similarly, the NSE pension index ended 2016 at 810.04 basis points but has so far gained 411.57 basis points to end the third quarter 2017 at 1,221.61 basis points.
Analysis shows market capitalisation rose by N2.97 trillion. Market capitalisation rose from N9.246 trillion as at December 31, 2016 to N12.216 trillion by the end of the third quarter of this year.
Other sectoral indexes that beat the market are the NSE premium index, NSE 30 index and the NSE main board index. They marginally outperformed the market to end the third quarter of 2017 at 31 percent, 31 percent and 29 percent respectively.
By gaining 627.68 points , the NSE premium index closed the third quarter at 1,610.93 basis points, while the NSE 30 index added 427.23 points to end the third quarter at 1,622.43 basis points, up from 1,195.20 basis points on December 31, 2016.
Furthermore, the NSE main board index gained 407.14 basis points to end the third quarter at 1,610.93 basis points, up from 1,203.79 basis points on the last trading day of 2016.
Olubunmi Asaolu, a senior analyst with FBN Quest, attributed the impressive performance of the banking index to the financial results of banks listed on the NSE which are components of the index. “The financial results of most banks have been impressive so far. This explains why the banking stocks are attractive to investors”, Asaolu said.
The NSE banking index has ten banking stocks as its components and they are Zenith Bank, Ecobank (ETI), Access Bank, Sterling Bank, and UBA. Others are Diamond Bank, GTB, Union Bank, Fidelity Bank and Wema Bank. The ten banks declared N312.7 billion as profit after tax (PAT) as at the end of June 2017 and that was 37 percent higher than the N228.7 billion they collectively made as PAT in the same period in 2016. These stocks are also parts of the components of the pension index which has 40 equities.
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As at the end of September 2017, the share prices of the ten stocks that made up the banking index are among the outperformers on the NSE.
UBA share price rose by 92 percent year to date; ETI, 70.2 percent; Access, 64.1 percent; GTB, 62 percent; Fidelity, 59.5 percent; Zenith, 58.6 percent; Sterling 38.2 percent and Diamond bank, 25 percent. Only Wema closed at negative 7.4 percent within the same period.
“There is a very high probability that the components of the banking and pension indexes will sustain the tempo till year end. This is because economic conditions are improving. Oil prices are rising, inflation is reducing and hoping that Nigeria will keep the daily output steady. There will be more foreign earnings to the three tiers of government, which means contractors and civil servants will be paid as at when due and there will be more money to invest”, said Saheed Bashir, a senior analyst with Meristem Securities.
Other indexes underperformed the All Share Index. The NSE consumer goods index rose by 26 percent during the same period. The NSE industrial index was likewise up by 22 percent, while Lotus and insurance indexes were up by 19 percent and 10 percent respectively. On the contrary, the NSE ASeM index, as well as the oil and gas index closed at -3 per cent and -11 per cent. (BusinessDay)