Investors Reap High Gains as Stock Market Returns Beat Inflation

0

Goddy Egene
Investment in stocks has continued to deliver significant rates of returns to investors that beat inflation, an analysis of the performance of the market in January 2018 has revealed.
Most investors in the stock market reaped bountifully in 2017 as the market rebounded from a three-year decline to gain 42.3 per cent.

The positive market rally continued in 2018, pushing stocks to new highs at the end of January, defying apprehension of illiquidity and profit taking.

THISDAY checks showed many investors smiled home from the market, recording returns that are significantly above the inflation rate that stood at 15.37 per cent in December 2017. While some analysts are projecting a further reduction in the inflation, some investors in the stock market are not worried about what the inflation will be because the returns on their investments are very high.

For instance, Skye Bank Plc gained 194 per cent in January followed by Unity Bank Plc that appreciated by 187 per cent. Diamond Bank Plc fetched investors 112 per cent. FCMB Group Plc appreciated by 107 per cent, just as Sterling Bank Plc chalked up 94.4 per cent. Cement Company of Northern Nigeria Plc grew by 86.8 per cent, while Caverton Offshore Support Group Plc went up by 82.9 per cent. Jaiz Bank Plc went up by 69.8 per cent, while Transcorp Plc and FBN Holdings Plc garnered 59.5 per cent and 58.5 per cent respectively.
C & I Leasing Plc, WAPIC Insurance Plc and Livestock Feeds Plc recorded significant growths, posting 51.1 per cent, 50 per cent and 46.9 per cent in that order among others.

On the negative side, the highest price decline in the month January was 16 per cent. Three stocks- LASACO Assurance Plc, Glaxosmithkline Consumer Nigeria Plc and ABC Transport Plc depreciated by 16 per cent apiece. This was followed by AG Leventis Nigeria Plc and Newrest ASL Plc that shed 14.2 per cent each among others.
In all, the stock market maintained its leading position as one of the top performers globally. In terms of market capitalisation the Nigerian equities market added over N2 trillion in January alone.
A Lagos-based investment banking firm, Cordros Capital Limited (CCL) had last week said the 2018 economic outlook favours the equities market.

Group, Managing Director/Chief Executive Officer, Cordros Capital Limited, Wale Agbeyangi, who led the management team to present to investment outlook titled “Nigeria in 2018: Looking Beneath the Surface” said when compared to the last two years, Nigeria’s macro outlook is more favourable to equities.
Their outlook for outlook for equities comprised three scenarios, saying that in their past 10 years of existence, Cordros Capital forecasts have been close to reality.
According to the Head, Research and Strategy, CCL, Christian Orajekwe, the first scenario assumes that equities will return excess of 40 per cent in 2018.

“We have considered five possible triggers of the rally. The probability of the triggers is low to moderate. The possible triggers, in order of importance to Nigerian equities are: significantly favourable macroeconomic and political backdrop; strong corporate earnings growth; strong portfolio inflows; mergers and acquisition (M&A) activities; and strong moderation of fixed income and treasury yields,” he said.
Their second scenario assumes about 10 per cent to 15per cent equities return in 2018.

“We have considered four possible triggers of the rally. The probability of the triggers is moderate to high. The possible triggers, in order of importance to Nigerian equities, are: moderate improvement in the macroeconomic environment, as widely envisaged; stable to modest corporate earnings growth; modest improvement in portfolio inflows over 2017; and marginal moderation of fixed income and treasury yields,” Orajekwe added.

According to him, the last scenario assumes equities will deliver between 20per cent to 25per cent negative return in 2018. “We have considered four possible triggers of the sell-off. The probability of the triggers is very low to moderate. The possible triggers, in order of importance to Nigerian equities, are: macroeconomic and political shocks; poor corporate earnings; MSCI delists Nigeria from its emerging market index; and foreign portfolio investors flee naira assets,” he noted, adding, “though our projections are not static and as scenarios unfold, we will continue to adjust our projections.”