The Nigerian equities market gained N266.6 billion last week, thereby raising hope that the market will recover in the new year, after a decline in 2019.
The market ended last year negatively as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) declined by 14.6 per cent. Many stocks lost almost half of their value due to weak investor sentiments.
However, as trading opened for 2020, activities of bargain hunters appeared to be driving the market, leading to positive performance last week. The NSE ASI appreciated by 2.1 per cent to close at 26,968.79, while market capitalisation added N266.6 billion to close at N13.019 trillion. All other indices closed higher with the exception of NSE ASeM Index, which closed flat.
But the NSE Oil & Gas Index recorded the highest gain of 5.4 per cent boosted by Eterna Plc and Seplat Petroleum Development Company Plc that appreciated by 20 per cent and 7.7 per cent respectively.
In a similar vein, price appreciation of 39.5 per cent in Cornerstone Insurance Plc lifted the NSE Insurance Index by 4.6 per cent, while the NSE Banking Index rose 2.9 per cent on gains by Ecobank Transnational Incorporated Plc and United Bank for Africa Plc. The NSE Consumer Index and Industrial Goods Index added 0.8 per cent and 0.3 per cent in that order.
Meanwhile, analysts at Cordros Capital said the theme for the equities market in 2020 remains the same as in 2019, with domestic and external factors as the major drivers.
According to them, following on from 2018, Nigerian equity returns have weakened further, as domestically, corporate profit expansion and macroeconomic growth have slowed, while externally, trade tensions have come into sharper focus.
The analysts explained that since a pre-election rally in February of 2019, the ASI had has consistently underperformed, declining 14.6 per cent at the end of the year.
“Stripping out telecom behemoth MTN Nigeria Communications, which was listed in the second quarter (Q2) of 2019 with a market capitalisation of N1.83 trillion, market return is north of 20 per cent. Our base case, as we enter 2020, posits muted stock market performance for the year,” they said.
The analysts noted that this year’s market performance is likely to culminate in a replay of the 2014-2016 period, wherein the market declined for three consecutive years, losing a cumulative 39.7 per cent over the period.
“This year, forward price earnings ratio (P/E) levels hit their lowest since March 2015 and expected earnings (implied earnings) are also at their lowest since December 2017.Interestingly, overlaying the forward P/E and the trailing P/E (essentially present market valuation), shows a convergence – for the first time – which in theory implies a sign of collapsing growth expectations and an impending downtrend in earnings. This presents a difficult period as earnings and valuations both decrease leading to a potential value trap for investors,” they said.
Despite the foregoing, some stakeholders believe 2020 will see the return of the bulls to the stock market. For instance, Mr. Sola Oni said the outlook for the market in 2020 is attractive, provided the Nigeria’s weak economy where the Gross Domestic Product (GDP) currently grows at 2.3 percent while the country’s population grows at 2.6 per cent could be fixed.
“ We expect faithful implementation of 2020 budget which was approved on record time. Government at all tiers should also take advantage of the market to mobilize fund for development projects. However, we expect the market to be driven by a mix of factors.
Effects of negative real return on fixed income securities following the new policy on Open Market Operation(OMO) will continue to enhance demand for equities and attract more investors into the market. We expect consolidation to be the hallmark of insurance sector as the market shall witness a flurry of mergers and acquisitions as well as business combination in a bid by insurance companies to recapitalize in line with the new policy of the National Insurance Commission (NAICOM),” he said.
On his part, Mr. Oluropo Dada of Network Capital Limited, is expecting a positive performance because the fundamentals of the quoted companies remain strong despite the harsh macro-economic variables.
“By way of dividend, many companies especially banks will return over 10 per cent yield based on historical records. Again, we expect PFA to make occasional intervention as a result of lower yields from the other market. However, it appears local investors will be the major determinant of the outlook as higher yields from United States markets may keep foreign investors away for some time. By and large, 2020 appears more promising that the previous years because the valuations of the stock market instruments are becoming more attractive to all the various classes of investors,” Dada said.
In terms of market turnover, investors traded 2.309billion shares worth N21.675 billion in 14,906 deals last week compared with 735.702 million shares valued at N7.132 billion that exchanged hands the previous week week in 7,138deals. The Financial Services industry remains the most traded, accounting for 1.924 billion shares valued at N10.148 billion traded in 9,287deals, thus contributing 83.31 per cent and 46.82 per cent to the total equity turnover volume and value respectively. The Conglomerates industry followed with 188.538million shares worth N284.531million in 530deals, while the third place was occupied by the Industrial Goods industry with a turnover of 56.007million shares worth N4.793 billion in 1,304deals.
Trading in the top three equities namely: Omoluabi Mortgage Bank Plc, Transnational Corporation of Nigeria Plc and Zenith Bank Plc accounted for 1.131billion shares worth N3.6 billion in 2,249deals, contributing 48.98 per cent and 16.61 per cent to the total equity turnover volume and value respectively.
In terms of exchange traded funds (ETFs), a total of 4,033 units valued at N4.233 million were traded last week in 26 deals, compared with a total of 14,443 units valued at N3.009 million transacted the previous week in19 deals. A total of 204,300units of Federal Government Bonds valued at N237.207million were traded last week in four deals, compared with a total of 1.074 million units valued at N1.283 million transacted two weeks ago in 24 deals.
Top price gainers and losers
The price movement chart showed 44 equities that appreciated 31 equities in the previous week, while 24 equities depreciated in price, higher than 17 equities in the previous week. Cornerstone Insurance Plc led the price gainers with 39.4 per cent trailed by Eterna Plc with 20 per cent, while Royal Exchange Plc chalked up 17.8 per cent. Vitafoam Nigeria Plc garnered 17.5 per cent.
AXA Mansard Insurance Plc appreciated by 11.1 per cent, just as Niger Insurance Plc, Union Diagnostic & Clinical Services Plc and NEM Insurance Plc gained 10 per cent apiece. Ecobank Transnational Incorporated and UACN Property Development Company Plc added 9.4 per cent and 8.7 per cent respectively.
Conversely, Fidson Healthcare Plc led the price losers with 12.9 per cent, trailed by Union Bank of Nigeria Plc with 11.7 per cent. Deap Capital Management & Trust Plc and Omatek Ventures Plc went down by 10 per cent each.
Other top price losers included: Learn Africa Plc (9.6 per cent); Linkage Assurance Plc (9.4 per cent); Interlinked Technologies Plc (9.0 per cent); Cutix Plc (8.1 per cent) and Trans-nationwide Express Plc (8.0 per cent