Nigeria’s equity market has recorded a whooping N1.7trillion gain in market capitalisation within just eight (8) trading days into 2018, a development which defies most analysts’ short-term outlook.
The Nigerian bourse main Index rose to above 43,000 points (43,041.54 points) on Thursday, a level last seen in October 2008, after local and foreign funds bought shares across several sectors.
The All Share Index (ASI) opened this year at a low of 38,243.19points. The value of listed equities which opened this year at N13.609 trillion also rose to N15.317trillion.
Stocks that helped champion this year-to-date (Ytd) rally and their gain include: FCMB Group Plc (70.3percent); Diamond Bank Plc (68.0percent), Sterling Bank Plc (61.1percent); Eterna Plc (55.7percent); Honeywell Flour Mills Plc (52.4percent); Skye Bank Plc (54percent); Transcorp Plc (45.9percent); Conoil Plc (40.6percent); Jaiz Bank Plc (41.3percent); Unity Bank Plc (45.3percent); Dangote Flour Mills Plc (39.1percent); and Fidson Healthcare Plc (35.7percent).
Given decent interest across board, as well as the overall positive market sentiment – indicated by the widely positive market breadth at last week close, Vetiva Capital analysts foresee further bullish trading.
Equities rallied for the sixth day on Thursday, climbing 2.93percent (N436billion) to add to a 9.3percent rise since the start of the year.
On Wednesday stocks posted N517billion gain, their biggest one-day gain in seven months. Traders said foreign investors are taking positions in consumer goods while local pension funds snapped up shares in a switch from bonds, where the outlook for yields is negative as government seeks to lower its borrowing costs.
“From a valuation standpoint, the trends in average multiples vis-à-vis movement in the overall market prices suggest an upward trend in corporate earnings across sub-Saharan Africa (SSA). This is a true reflection of the macroeconomic improvement seen in many SSA economies,” said analysts at United Capital.
The analysts believe that following the implementation of a decent list of pro-market policy actions in 2017, the chill of recession has given way to spring, “and leading indicators have turned positive.” “Improvement in currency market condition, oil output level and prices have given the economy a new lease of life. Though slowly, inflation rate is moderating, and investor confidence is strengthening,” United Capital analysts said.
Last year’s gain was the biggest since 2013, and traders had said they expected further advances fuelled by hopes of lower interest rates and a more stable currency.
Year-end results due in March are also helping lift sentiment towards equities, traders said, especially after data showed that Nigeria’s forex reserves had started to increase after a currency crisis, a sign of support for the naira.
The outlook of the equity market remains positive in 2018 according to FSDH researchers. They expect the factors that drove the equity market in 2017 to support the market rally in 2018. The analysts observed a strong correlation between the historical movements in the NSE ASI and the crude oil price (Bonny Light) which reached a high of $70 per barrel. The current consensus is that the average price of crude oil will be marginally higher in 2018 than 2017.
Iheanyi Nwachukwu
