The stock market is on a bullish run. Investors have never had it so good in a long while. The All Share Index (ASI) closed at 36,864.71 points Friday, 29 July up 37 percent since the beginning of the year. It is now the best performing stock market in the world. In July alone, the stock market was up N1.25 trillion, a record gain by all means. The ASI was also up 11.31 percent in July. Already the market is approaching the psychological important benchmark of 40,000 points.
Many stocks are also trading close to their 2014 levels when the ASI hit a peak of 43,000 points before retreating.
Stocks that have already surpassed their 2014 price levels include GTB which closed at N41.10 per share on Friday, compared to N29.6 in 2014, Stanbic (N37.53 now /then N26.76), Access (N10.11 now/ then N9.19), Zenith (N25.90 now /then N25.1), International Breweries (N32 now / then N29.4), UBA (N9.81 now/ then N7.9), Okomu (N74.41 now/then N33), Total (N270 now/N171 then), Mobil (N253 now/N135 then), Presco (N73.20 now/ N37 then), ETI (N17 now/ N16.24 then) and Dangote Sugar (N10.86 now/N9.30 then).
The significant gain in stock prices, which started in March after the Central Bank of Nigeria (CBN) adjusted its foreign exchange rate policy, is coming at a time the economy is still technically in a recession. All indications are that the stock market has left the economy behind. This is why questions are being asked if the market is experiencing a burble that could result in investors see their stocks come crashing?
Some analysts are projecting that the stock market is heading for a medium term resistance level of 42, 000 points after crossing the 30,000 points line in the first half of the year. But the market already showed some sign of retreating from its projected mark, when it closed lower on Monday, 31 July apparently as investors started to take some of the profits they have made in the July bullish run.
However, there are indications that what has happened in the stock market in the last five months has basically been a re-pricing of stocks following the “technical” devaluation of the naira in February when the CBN introduced the investors and exporters window. The introduction of the window also opened the market for foreign investors, who also saw it as an opportunity to buy the now cheaper Nigerian stocks. The impact has been the inflow of new foreign investor funds and a basic re-pricing of selected stocks to their pre devaluation levels.
The expectation is that as long as there is no significant change in foreign exchange policy, the stock market is likely to hold at current levels than fall. In fact, there is still headroom for a real bullish run for selected stocks than a bearish run.
