Stock Market Extends Rally, Gains N852bn in Two Days

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By Goddy Egene

The Nigerian stock market gained N852 billion in the first two days of this week as investors remained upbeat.

The market, which has remained bullish, gained N641 billion on Monday and extended its rally with an additional gain of N211 billion yesterday.

This lifted the capitalisation of the Nigerian Stock Exchange (NSE) to N17.059 trillion while the NSE All-Share Index (ASI) climbed to 32,647.10.

The NSE ASI rose four per cent on Monday and rose by another 1.3 per cent yesterday, bringing the gain in two days to 5.3 per cent.

Market analysts had said the Nigerian stock market would remain bullish after recording an unprecedented growth in October.

The market had jumped by N1.934 trillion in October, which was its best monthly gain since 2018 on the continued inflow of funds searching for real returns and positive reactions to better-than-expected third quarter(Q3) and nine months earnings so far released.

The Chief Research Officer, Investdata Consulting Limited, Mr. Ambrose Omordion, had said the low-yield environment and other factors had triggered buying interest in the equity space despite the seeming disconnection with economic realities to sustain the four consecutive months of bullish run.

He said: “The possibility of prices rallying further from here is high, amidst portfolio reshuffling on the strength of the Q3 numbers, just as investors would be assured of reward in the form of dividends when the full-year scorecards begin to flow into the market in the early days of 2021 despite the possibility of a dividend cut.

“It is expected that discerning investors and traders would take advantage of the prevailing relative low stock prices, year-end season and cycle to grow their income, ahead of major earnings season in the first quarter of 2021.”

After the positive performance in October, the market had opened the month maintaining the bullish trend with a gain of 1.56 per cent last week. And market analysts had envisaged a sustained bull run this week.

“As the Q3 earnings season winds down, we expect investors to shift their attention to yet to be published results from the big banks in the week ahead. In the short term, we still see scope for expansion in valuation multiples as hunt for alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market remain positive for stocks.

“However, we advise investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings,” analysts at Cordros Research said.

Similarly, analysts at Greenwich Research said: “Positive sentiment, boosted by impressive earnings performance continued to spur interest in the equities space, in the face of record-low yields in the fixed income space. Notably, gains recorded at the start and the end of the week pinned the market in the green zone. We expect this momentum will be sustained by positive Q3 earnings results, particularly from the banking space.”

This is just as S&P 500 dipped at the open on Tuesday as excitement over signs of a first successful late-stage COVID-19 vaccine trial faded, while investors continued to pull money out of the big tech companies that have benefited most from the pandemic.

The Dow Jones Industrial Average rose 96.20 points, or 0.33 per cent, at the open to 29,254.17. The S&P 500 opened lower by 7.24 points, or 0.20 per cent, at 3,543.26 while the Nasdaq Composite dropped 91.34 points, or 0.78 per cent, to 11,622.44 at the opening bell.

European shares hovered at eight-month highs on optimism around signs of a breakthrough in developing a COVID-19 vaccine, although concerns about the depth of the economic damage from the pandemic capped gains.

The pan-European STOXX 600.STOXX was flat after rallying 4.0 per cent in the previous session as the United States drugmaker, Pfizer Inc, said its COVID-19 vaccine, developed with a German partner, BioNTech, was more than 90 per cent effective in preventing the infection.

European shares have already surged 11 per cent this month as investors also cheered the possibility of calmer global trade under the U.S. President-elect, Joe Biden, but strict lockdowns to contain surging coronavirus cases have threatened a nascent economic recovery at home.

Italy’s bourse, FTMIB added 0.1 per cent a day after posting its best day since March. The country is ramping up business restrictions in Tuscany and four other regions to rein in the second wave of the pandemic.

Stock market gains in Asia after results from a late-stage COVID-19 vaccine trial fuelled optimism about the easing of global restrictions, which should help the region’s tourism- and trade-dependent economies next year.

Singapore, Thailand and Malaysia indexes were up between 2.0 per cent and 3.6 per cent, but those of tech-heavy Taiwan and China were the biggest losers.

Philippine equities rallied more than 5.0 per cent, brushing off the steep economic slump in the third quarter and helped by government assurances that the economy would rebound in 2021.