Despite bouts of profit taking at the Nigerian bourse, the equities market remains at a 52-week high as the year-end Santa Claus rally continues to buoy stocks.
The bullish run in recent weeks has been broad based with Dangote Sugar crossing the N21 mark for the first time in more than 7 years and FBN Holdings closing at N9.29 per share yesterday, a level not seen since May 2015.
Ahead of year-end, BusinessDay check shows some stocks have outperformed the NSE ASI after recording year-to-date (ytd) returns in excess of 150percent. Bismarck Rewane-led Financial Derivatives Company expects corporates earnings and policy consistency to keep Nigerian stock market stable into 2018.
The stocks and their returns are: C&I Leasing Plc (164percent); Dangote Flourmills Plc (182.4percent); Dangote Sugar Refinery Plc (251.9percent); FBN Holdings Plc (177.3percent); Fidelity Bank Plc (169percent); Fidson Healthcare Plc (199.2percent); International Breweries Plc (197.2percent); May& Baker Nigeria Plc (208.5percent); and Stanbic IBTC Holdings Plc (176.7percent).
The market has remained upbeat lately as economic fundamentals continue to improve on the backdrop of the sustained oil rally. Oil price has risen to $63.53 well in excess of budget benchmark. The stock market has benefited immensely from positive news on an improvement in macro data and the economy exiting recession.
The stock market on Tuesday routed north as Nigerian Stock Exchange (NSE) ASI inched up marginally by 0.03percent. The NSEASI appreciated to 38,924.63 points while Year-to-Date (YtD) returns stood at 44.84percent. The value of listed equities reached record high of N13.556trillion on Tuesday.
“We maintain our positive outlook for the market in the near term as the year-end rally continues. In the medium term, our outlook remains bullish against the backdrop of improving macroeconomic fundamentals and consensus expectation of positive earnings outlook,” Afrinvest analysts said in their recent stock recommendation.
Nigerian equities transactions in the first ten months of this year shows about N932.63billion (N546.72billion in 2016) worth of stocks were traded by domestic investors; while in the same ten-month period to October 31, 2017 foreigner investors accounted for N850.98billion (N444.38billion in 2016).
Kayode Tinuoye-led team of research analysts at United Capital Plc who had expected pockets of profit taking recently envisage a rebound in market performance later in the week “as portfolio managers embark on year-end portfolio rebalancing.”
Market watchers noted that since October 2016, Nigeria’s external reserves have added about $15billion, up 47.8percent YtD to settle at $38.2billion in December 2017.
“A rather interesting development is the co-movement between the reserves and the bull run of the equities market since April when the reserves hit the $30bn mark,” the analysts said, noting that the reserves and the NSEASI are both trending at 38months highs, with news around the reserves driving equities up.
“Foreign players track the position of a country’s external buffer to gauge the size of investment deployed,” United Capital analysts added.
Iheanyi Nwachukwu
