By Nse Anthony-Uko
(Sundiata Finance) – Nigerian stocks have rallied to their highest level since 2014, as the dust settles on a bruising economic recession that hammered company profits and share prices.
The All Share Index (ASI) rose 1.29 per cent to 40,362.97 points Tuesday, January 9, according to data available on the website of the Nigerian Stock Exchange, its highest level since September 29 2014.
Consequently, the year-to-date (YtD) return settled at 5.54 per cent. There were forty-seven (47) price gainers and seven (7) losers, thereby pegging the market breadth at 6.71 times.
Dangote Flour closed the day as the best performing stock, having gained N1.47 to close at N16.17.
First City Monument Bank (FCMB-9.05 per cent), WAPIC Insurance (7.41 per cent), Diamond Bank (6.57 per cent) and Honeywell flour (5.30 per cent) were the other top gainers in the market. In contrast, UAC properties was the worst performing stock after it lost 4.72 per cent to close at NGN3.03. Others at the top of the laggards’ list include NAHCO (-4.67 per cent), NESTLE (-3.33 per cent), UBN (-2.60 per cent), and Glaxosmith (-1.3 per cent).
“The market performance was driven by increased investor appetite recorded across many counters, particularly on Dangote Cement and the heavily weighted stocks in the banking sector,” analysts at Lagos-based financial advisory, Meristem Securities said in a Jan. 9 note to clients.
Save for the consumer goods sector index which declined by 31 basis points (bps), all the NSE sector indices ended in positive territory after today’s trading. The NSE banking and oil & gas indices gained 2.90 per cent and 1.16 per cent respectively while the industrial and insurance sector indices posted 74 bps and 71 bps increases apiece.
Having endured a difficult 2016 characterised by low oil prices, a drastic decline in economic output and acute foreign exchange shortages, the stock market has somewhat recovered in line with improved macroeconomic indicators.
Brent crude prices gained 0.28 per cent to $67.97 per barrel, Tuesday, the highest level since December 5, 2014, on expectations that U.S. inventories of stored crude are in the midst of the steepest wintertime decline in a decade.
The economy has also turned the corner, as five consecutive quarters of contraction have been followed by 0.5 per cent growth in the second quarter and 1.4 per cent growth in the third, according to the National Bureau of Statistics (NBS).
Meanwhile, the creation of the Investors and Exporters window by the Central bank has resolved acute dollar shortages and stirred investor confidence.
Some $18 billion is said to have been traded at the window since it was first created in April 2017, according to data provided by trading platform, FMDQ. The naira traded at N363 per US dollar at the said window, Tuesday.
“We are seeing a reflection of the positive correlation between equities and oil prices,” said Ayo Akinwunmi, head of research at FSDH Merchant bank. “Stocks are expected to sustain this upward swing in 2018 on the back of increased investor confidence, improved dollar liquidity, relatively high oil prices, stable production volumes and rising external reserves.”
Nigeria’s external reserves hit a 40-month high of $40.4 billion as of Jan. 8 2018, according to the central bank, a 44 per cent increase compared to the start of last year.
With the market rally, companies are expected to make more profit, leading to expansion in their activities and further expansion in investments in various aspects of the economy which would lead to job creation.
“Investors are going to make more money and companies listed on the NSE will be encouraged to raise more equity capital which would be used for further expansion as most companies couldn’t expand due to low share prices,” Akinwunmi added by phone.
The bullish outlook for the stock market would also trigger an increase in the number of listed companies, as firms would want to leverage the share price rally to raise capital, according to Tajudeen Ibrahim, head of research at Lagos-based investment bank, Chapel Hill Denham.
“There is a possibility of increase in the number of companies listed on the stock exchange and increase in expansion projects by companies leading to a positive impact on the economy at large,” Ibrahim said by phone.
Nigerian Stock Market Upbeat, Crosses 40,000 Points To 4-year High
By Nse Anthony-Uko