Low Prices Boost Equities Market’s Gain by N1.6tn in Q2

  • Healthcare, food, beverages lead gainers

Goddy Egene

The high demand for shares because of their low prices made the Nigerian stock market perform positively in the second quarter (Q2) of the year, gaining N1.667 trillion despite the lockdown occasioned by the COVID-19 pandemic.

THISDAY gathered that despite the lockdown and the attendant losses recorded by many businesses, investors were demanding the stocks of companies in the healthcare, food/beverages, and household products and telecommunications sectors believed to have been favoured by the COVID-19 pandemic.

The federal government partially locked down Lagos and Ogun states as well as the Federal Capital Territory (FCT), Abuja, to curtail the spread of COVID-19, since the beginning of Q2, a development that affected business activities.

However, the stock market showed resilience, ending the Q2 with growth compared to a decline in the first quarter (Q1). The stock market gained N1.667 trillion in Q2 as the Nigerian Stock Exchange (NSE) market capitalisation rose from N11.102 trillion to N12.769 trillion, as against a decline of N1.867 trillion in Q1.

Similarly, NSE All-Share Index (ASI) grew by 14 per cent from 21,300.47 to 24,479.22 as against 20.6 per cent decline recorded in Q1.

Market operators said the decline posted in the Q1 depressed the prices of many stocks, which investors found attractive in the Q2.

According to a stockbroker, Mr. Ayo Oguntayo, “following the depreciation witnessed in the Q1, most stocks hit their record lows and offering a very attractive entry opportunities for discerning investors. So, when the Q2 began and there were limited investment windows, investors found the stock market as a place to invest.”

He added that despite the lockdown and many businesses were counting their losses, investors were demanding the stocks of companies in the healthcare, food/beverages, household products, and telecommunications sectors.
He explained that these sectors are believed to be favoured by the COVID-19 pandemic.

However, in the first half of the year, the market has posted a depreciation of N200 billion due to huge decline recorded in the Q1.

After declining in Q1, the market began a recovery in the Q2, appreciating in April and May. But the gains recorded in April and May were moderated in June due to profit-taking by investors. Hence, the market ended the quarter with a growth of N1.667 trillion in Q2.

But for the decline of 3.0 per cent suffered in June, which was the last month of the Q2, the gain would have been higher.

Although the market has recorded a year-to-date decline of 8.8 per cent, which is an improvement on the depreciation of 20.6 per cent posted in Q1, some stocks have fetched investors significant gains.

For instance, investors in Neimeth International Pharmaceuticals Plc have recorded a gain of about 166 per cent. Law Union & Rock Insurance Plc has also provided a gain of 106 per cent to investors, while May & Baker Nigeria Plc has recorded a 48 per cent gain.

Investors in Ekocorps Plc are counting 41 per cent growth, just as those in Okomu Oil Palms Plc have gained about 39.2 per cent. AIICO Insurance Plc has recorded a growth of about 27.7 per cent, just as Beta Glass Plc has appreciated by 24 per cent.

Other stocks that have recorded growth are: Livestock Feeds Plc (24 per cent); Union Diagnostics and Clinical Services Plc (22.7 per cent); Cutix Plc (20.3 per cent); Morrison Industries Plc (20 per cent); and Vitafoam Nigeria Plc (18.9 per cent).

Market analysts have attributed the positive performance of the market in Q2 to the NSE investments in business innovation and digitisation made over the years. Since the activation of its Business Continuity Plan on 23 March 2020, NSE has sustained remote working and trading with no downtimes as stockbroking firms have been equipped to trade leveraging remotely.

NSE Chief Executive Officer, Mr. Oscar Onyema, recently said: “At the brink of the crisis, we received requests from investors seeking clarification on the exchange’s business continuity plans and our ability to keep the market open. This was clarified early enough as details of our robust response to COVID-19 were communicated to all stakeholders and we have enjoyed seamless remote operations since. This is, however, possible because of our commitment to digital transformation which began several years ago and continues to evolve with today’s emerging trends.”

According to him, NSE has reaped the rewards of these investments as the Nigerian capital market continues to enjoy the market activity, liquidity, and new listings.

He said the market returned month-on-month gains of 8.1 per cent and 9.8 per cent at the end of April and May 2020 respectively; increased participation of domestic investors in the capital market; strong performance in the fixed income market; and impressive returns in alternative investments such as the Newgold ETF.

Onyema added that stakeholders in the market should expect to see the development of alternative and sustainable asset classes; dependence on technology and digital innovation; commitment to customer centricity; and drive for collaboration across regions.

“With these, capital market players can rest assured that exchanges will continue to deliver on their mandate to deliver a platform to raise and access capital even during a crisis. Certainly, we are living in unprecedented times but from what we have heard here today, I believe that we can all leave with the confidence that there is a lot to look forward to in this ‘new normal,’” he said.