By Nkiruka Nnorom
THE unprecedented bullish run that prevailed in the equities market for most part of last month (May), especially at the later part of the month that saw the equities capitalisation gallop to over N10 trillion mark has resulted in huge N1.29 trillion gains to investors.
The action pushed the Return-on-Investment, RoI, for the period to 14.5 per cent, higher than the year-to-date, ytd, return, which stood at 9.8 per cent, a development market operators attributed to some positive macro-economic developments in the country and better than expected first quarter, 2017 (Q1’17) results.
The capital market operators further opined that Prof. Yemi Osinbajo’s return as the Acting President helped to buoy activity in the market within the period.
Financial Vanguard findings on the stock market activities in the period showed that the banking sector topped others, appreciating by 26 per cent on the back of gains in top banking stocks like FBN Holdings Plc, Ecobank Transnational Incorporated, ETI, United Bank for Africa, UBA, Zenith Bank Plc and Guaranty Trust Bank Plc.
The late passage of the Petroleum Industry Bill, PIB, by the National Assembly, NASS, in the later part of the month could not lift sentiment in the oil and gas sector as it lagged behind others, depreciating by 2.5 per cent. This, however, was an improvement compared to 5.4 per cent negative return recorded in the sector in the five month to end May, 2017.
Consequent upon the rally, the equities’ capitalisation rose by N1.29 trillion from N8.91 trillion at the beginning of the month’s trading session to N10.2 trillion, thus representing 14.4 per cent returns.
Also, the All Share Index, ASI, rose by 14.5 per cent from 25,756.51 points to settle at 29,498.91 points.
Positive macro-economic developments
Some of the positive developments that impacted the market during the period include the creation of the investors and exporters foreign exchange window by the Central Bank of Nigeria, CBN, which allowed easy access to foreign exchange by both investors and exporters. Since the introduction, the window has prompted unprecedented rally in the stock market, according to capital market operators.
During the period, the Purchasing Managers Index, PMI, rose to over 50 per cent indicating revival in private sector operation.
Added to these is the gross domestic products, GDP, figure, which, though, contracted to 0.5 per cent in April, was a significant improvement against the two previous positions.
Banking sector leads
The positive run was spread across the entire sectors as four of the sectors recorded price appreciation with the exception of the oil and gas sector that depreciated in value during the month.
The banking sector led, rising by 26 per cent on the back of 67.2 per cent, 37.5 per cent, 28.9 per cent, 27.7 per cent and 27.2 per cent increase in FBN Holdings Plc, ETI, UBA, Zenith Bank and GTBank respectively.
This was followed by the consumer goods sector, which rose by 19.1 per cent driven by activity in Nestle Nigeria Plc which rose by 20.4 per cent and GlaxoSmithKline that advanced by 20.7 per cent during the month.
The insurance sector was the next with 11.9 per cent on account of impressive return on Axamansard Insurance and Law Union & Rock Insurance Plc which rose by 43.3 per cent and 30.7 per cent respectively. The industrial goods sector recorded 1.96 per cent return during the period.
However, losses in Seplat Petroleum Development Company and Mobil Oil Nigeria Plc that depreciated by 14.2 per cent and 14.3 per cent respectively left the oil and gas sector with negative return of 2.5 per cent.
Healthcare stocks lead gainers
Further breakdown of activities in the market showed that for every loser, there was three gainers as 61 gainers emerged during the month compared to 21 losers, while 89 recorded no price change.
Companies in the pharmaceutical sector appreciated the most with Fidson Healthcare and May & Baker Plc leading the rest with 107.3 per cent and 75.3 per cent to close at N2.28 and N1.49 respectively.
FBN Holdings Plc in the financial services sector followed, appreciating by 67.2 per cent to close at N5.30 per share, while Oando Plc and Axamansard Insurance closed as the last on the top five gainers, rising by 46.2 per cent to close at N8.45 and 43.3 per cent to close at N2.26 per share respectively.
ASI to hit 40,000 pts, Osinbajo Ag Presidency is a factor – Operators
Explaining the rally witnessed in the month, Mr. David Adonri, Managing Director/CEO, Highcap Securities Ltd, said that market recovery is imminent if the economy grows steadily out of stagflation.
He opined that there is possibility that the ASI could hit 40,000 points this year.
“As the economy recovers from stagflation, there is natural tendency for financial assets to shift to equities. Foundation for current rally in the capital market was laid when several full year results and dividend payouts were unexpectedly impressive. The market has also benefited from CBN foreign exchange special window for foreign investors,” he said.
He added that the positive feeling of Professor Yemi Osinbajo’s come back as Acting President may also have increased investors’ confidence in the market.
Adonri emphasised that the majorly impressive Q1’17 results served as foundation for the recovery being witnessed.
He, however, said that the rally would not be in continuous unbroken stretch, stressing that the bull and bears run would, as usual, be intermittent.
On expectation for the quarter two 2017, Q2’17, he said that with steady improvement in the economy, performance at the end of Q2’17 should surpass what was witnessed in Q1’17.
Adding his voice, Mallam Kurfi Garba, Managing Director/CEO, APT Securities & Investment Ltd, said: “The economy is responding positively, the market is doing the same because the market looks at the future. If the economic situation looks good, the market will project that the future will likely be better than now, so the market will start moving in the positive direction.”
June turns up with bulls
Meanwhile, the positive sentiment continued in the Nigerian Stock Exchange, NSE, in the new month, June, as investors have recorded N647 billion gains within the first two trading days of the month. This represents 6.3 per cent increase within the two days period.
Similarly, the ASI rose by 6.4 per cent to settle at 31,371.63 points, pushing the year-to-date returns to 16.7 per cent.
Specifically, the market capitalisation, which represents the total value of equities listed and traded on the Exchange went up by 2.8 per cent on June 1, 2017 to N10.479 trillion from N10.198 trillion, while on June 2, 2017 it rose further by 3.5 per cent to close at N10.845 trillion from N10.479 trillion.
In the same vein, the ASI jumped by 2.8 per cent on Thursday, June 1, 2017 to close at 30,314.14 points. It rose by further 3.5 per cent to 31,371.63 points on Friday, June 2, 2017.