Following the marginally gain recorded on the Nigerian stock market last week, analysts have predicted that bullish sentiments to maintain dominance following the release of impressive results from the banks and investors positioning for interim dividends.
The market will enter the month of September this week, which is the last month in third quarter (Q3), investors may consider investing more in the market as the year is moving to the end.
Capital market noted that the anticipated positive news of second quarter (Q2) GDP growth of 5.01 per cent was released to the market by the NBS to increase the number of good news despite the lingering social-political and structural impediments which had hindered the nation economic progress and peace.
The chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion said “The better-than-expected Q2 GDP data was not a surprise to us in Investdata as the just concluded half year earnings season and other macro-economic indices have given insight before now, as the purchasing managers index hits 18 months high of 55.4 points as of July from 53.6 point in June according to Stanbic IBTC Bank’s report.
“Also, the Consumer Price index, which measures price movement of goods and services recently, recorded four straight months of decline as inflation figure for July stood at 17.38 per cent from its high of 18.28 per cent in March this year.”
In the second quarter of 2021, Nigeria printed a year-on-year (y-o-y) real output growth rate of 5.01 per cent to N16.69 trillion as it recovered faster from last year’s recession. Specifically, we have seen federal government significantly ease lock down measures as households and businesses were allowed to resume economic activities.
The several billions of naira in economic stimulus packages provided by the monetary and fiscal authorities to help households and businesses cope with the effects of COVID-19 also supported the sharp economic recovery witnessed in the review period.
Omordion said that “As this remains, the fastest and highest growth the nation economy has recorded in the last 24 months, which was driven by non-oil sector, an indication that agricultural, manufacturing, services and others, are looking up as the economic recovery remains a plus for the stock market, as corporate earnings have given insight before now.”
In another development, the Nigerian capital market appears to have further deepened its product offerings amid increasing growth of structured transactions. One of the fast-growing structured arrangements, Securities Lending, is the market practice of transferring shares for a fee from a holder (the lender) to another party (the borrower), with the borrower agreeing to return the securities to the lender either on demand or at the end of the agreed loan term. It provides strong potential to deliver benefits to all market players through capital gains and low-risk incremental income. It also plays an important role in the capital market by providing liquidity, which in turn reduces the cost of trading as well as promotes price discovery.
According to the Nigerian Exchange (NGX) Limited, the value of Securities Lending market increased to N513 million as at August 20, 2021 amid rising stakeholders’ participation as 2.3 million units of MTN Nigeria Communications (MTNN) valued at N395.6 million was borrowed.
Analysts at Afrinvest Limited said that “This week, we anticipate the bulls to maintain dominance following the release of impressive results from the banks and investors positioning for interim dividends.”
Cordros Securities Limited stated that “Considering the lull in the market last week, we believe earnings from the Big banks this week will bring some breath of fresh air to the local bourse. Particularly, as the declaration of interim dividends will accompany the results. Overall, we advise investors to seek trading opportunities in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.”
In the new week, analysts at Cowry Asset Management Limited expected the equities market index to trade positively as investors are likely to buy banking shares, especially the tier-one banks amid anticipated interim dividend payment.
Last week, the equities market recorded mild gains on all trading sessions save Monday and Wednesday. Consequently, the benchmark index closed the week higher by 2.57 points or 0.01 per cent to close 39,485.65 points. Similarly, market capitalisation rose N2 billion to close at N20.573 billion.
Specifically, the market reacted slowly to the spike in Q2, 2021 GDP growth rate and the release of the positive H1, 2021 financial result and the 30 kobo interim dividend declared by Zenith Bank.
Sectoral performance was upbeat; the NSE Banking, NSE Insurance and the NSE Oil & Gas indices increased by 0.30 per cent, 1.06 per cent and 0.08 per cent to 378.99 points, 190.07 points and 1,976.72 points respectively. On the flip side, the NSE Consumer Goods and the NSE Industrial indices moderated by 0.43 per cent and 0.19 per cent to 556.59 points and 1,976.72 points respectively.
The market breadth for the week was positive as 35 equities appreciated in price, 29 equities depreciated in price, while 92 equities remained unchanged. UPDC led the gainers table by 37.59 per cent to close at N1.83, per share. Morison Industries followed with a gain of 32.14 per cent to close at N1.85, while Consolidated Hallmark Insurance went up by 21.74 per cent to close to 56 kobo, per share.
On the other side, Associated Bus Company led the decliners table by 15.38 per cent to close at 33 kobo, per share. Unilever Nigeria and Ikeja Hotel followed with a loss of 10 per cent each to close at N13.50 and N1.26 respectively, while SCOA declined by 9.43 per cent to close at N1.44, per share.
Overall, a total turnover of 1.026 billion shares worth N8.183 billion in 18,102 deals were traded last week by investors on the floor of the Exchange, in contrast to a total of 866.544 million shares valued at N12.257 billion that exchanged hands previous week in 17,291 deals.
The Financial Services Industry (measured by volume) led the activity chart with 567.225 million shares valued at N3.658 billion traded in 7,970 deals; contributing 55.30 per cent and 44.70 per cent to the total equity turnover volume and value respectively. The ICT Industry followed with 126.638 million shares worth N1.164 billion in 1,073 deals, while Consumer Goods traded a turnover of 90.497 million shares worth N1.454 billion in 3,344 deals.
Trading in the top three equities; Sovereign Trust Insurance, Mutual Benefits Assurance and Transnational Corporation of Nigeria (Transcorp)accounted for 247.735 million shares worth N114.399 million in 809 deals, contributing 24.15 per cent and 1.40 per cent to the total equity turnover volume and value respectively.