January 18, 2021

FMN, Dangote Sugar, others, drive equities to new height

Stock market

Stock Market

Stock Market

By Nkiruka Nnorom

•Investors reap 2.63% returns

•As analysts advise investors to buy in tranches

The equities market has consolidated the new year’s gaining streak following bargain hunting in leading companies last week including, Flour Mills of Nigeria (FMN) Plc, Dangote Sugar Refinery Plc, Dangote Cement and Zenith Bank Plc, a development that has yielded 2.63 percent returns to investors.

Meanwhile investment analysts have advised investors to buy in tranches considering the volatility in the market and in order to reap from any unexpected upward movement.

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Analysis of the week’s transactions show that Flour Mills of Nigeria Plc rose by 22.9 percent, followed by Dangote Sugar, which advanced by 8.6 percent, while Dangote Cement Plc and Zenith Bank Plc appreciated 5.3 percent and 2.5 percent respectively following the bargain hunting activities.

Consequently, investors reaped N552 billion gain after the equities market capitalisation appreciated to N21.530 trillion from N20.978 trillion, while the benchmark All Share Index (ASI) advanced to 41,176.14 points, representing 2.63 percent increase apiece.

Also, the Year-to-Date (Y/D) return swung into positive territory, settling at 2.2 percent compared to -0.4 percent in the previous week.

Performance across the sectors was positive as all the sectors closed positive. The insurance sector with 17.5 percent increase topped the gainers chart, followed by the oil and gas (+7.3%), consumer goods (+3.1%), industrial goods (+2.8%) and the banking (+2.5%).  

Activity level was also positive as trading volumes rose marginally by 1.5 percent to 3.447 billion units, while value traded jumped by 64.7 percent to N32.725 billion.

  Meanwhile, analysts at Cowry Asset Management have said that the market would close the year positive, arguing that the overall performance in 2020, despite the challenges of Covid-19 and the accompanying economic recession, encourages optimism.

“This is also justified by the strong fundamentals of the several quoted companies on account of their resilience during the pandemic and the likelihood that they will remain resilient in 2020,” they said.  

They, however, advised investors to buy in tranches and also have a long-term investment strategy in order to reap the long-term benefits of Africa Continental Free Trade Agreement (AfCFTA).

“To navigate the equities market for good profitability, we advise investors to determine their investments horizon, either short-term or long-term, as this will be the basis for entry, and exiting the equities market at this time that the stock market appears highly volatile.

“Short-term investors, who prefer quick capital gain should focus more on stocks with good fundamentals.

“We, however, advise short term investors to trade with caution as we believe that recoveries in corporate performances, following the ease in lockdown, are currently being priced in and spread between market prices and fair values of quoted companies are thinning out.

“On the other hand, we expect long term investors to seek out bargain hunting opportunities, especially in value or undervalued stocks with relatively high dividend yields.

“Irrespective of the investment horizon, we suggest that investors should buy in tranches in order to take advantage of lower prices, in a market where prices fluctuate significantly, so that they would stand to benefit from higher upside potentials to their weighted average cost in the event of an unexpected upward price movement,” they said.