By Taofik Salako, Deputy Group Business Editor
Nigerian equities shot into the lead of the world’s equities performance with a N2.1 trillion net capital gains at the weekend amid global optimism on recovery and attractive domestic valuation.
Benchmark indices at the Nigerian stock market closed weekend with average return of 12.97 per cent or N2.10 trillion, the best performance among tracked advanced and emerging global stock markets.
The All Share Index (ASI)- the value-based common index that tracks all share prices at the Nigerian Stock Exchange (NSE) closed weekend at 35,057.46 points from its week’s opening index of 31,016.17 points, representing an increase of 12.97 per cent.
Most analysts continued to see headroom for further price appreciation for Nigerian stocks, citing steady earnings, historic dividend pattern and relatively attractive valuation.
Aggregate market value of all quoted equities at the NSE also rose from the week’s opening value of N16.207 trillion to close weekend at N18.308 trillion, representing an increase of N2.10 trillion. The congruence between the ASI and market value underlined that the value increase was due to price appreciation, rather than addition of shares.
Global stock analysis showed that Nigerian stocks were atop the weekly return table, with almost five percentage points ahead of the closest global market. In the advanced markets, United States of America (USA)’s benchmark indices showed continued positive sentiment as the world awaits the final result and confirmation of the American presidential election, already called for opposition Democrat, Joe Biden. The S & P 500 rose by 1.4 per cent. The Dow Jones Industrial Average (DJIA) appreciated by 2.7 per cent. However, the NASDAQ Index dropped by 1.2 per cent.
United Kingdom’s FTSE All Share Index rose by 7.1 per cent. France’s CAC 40 Index appreciated by 8.4 per cent. Germany’s XETRA DAX Index posted average weekly return of 4.8 per cent. Japan’s Nikkei 225 Index rose by 4.4 per cent. Hong Kong’s Hang Seng Index appreciated by 1.7 per cent while Russia’s RTS Index indicated average weekly gain of 4.2 per cent. China’s Shanghai Composite Index however fell by 0.1 per cent.
In the emerging markets of Asia, Middle East and Africa, global optimism also fuelled generally positive market performance. India’s Bombay Stock Exchange (BSE) Sens Index rose by 3.7 per cent. Brazil’s Ibovespa Index appreciated by 2.7 per cent. United Arab Emirates (UAE)’s ADX General Index rose by 2.9 per cent. Qatar’s DSM 20 Index appreciated by 3.3 per cent. Turkey’s BIST 100 Index rallied by 8.3 per cent. Thailand’s SET Index rose by 6.9 per cent while Saudi Arabia’s Tadawul ASI posted average weekly return of 4.3 per cent.
In Africa, Africa’s largest stock market, South Africa’s FTSE/JSE ASI rose by 1.4 per cent. Kenya’s Nairobi Stock Exchange (NSE) 20 Index rose by 1.1 per cent. Egypt’s EGX 30 Index appreciated by 3.7 per cent. Morocco’s Casablanca MASI rose by 2.9 per cent. Mauritius’ SEMDEX Index posted average gain of 2.6 per cent while Ghana’s GSE Composite Index inched up by 0.8 per cent.
The broad STOXX Europe Index showed average return of 5.1 per cent for the week. Also, the broad tracker of emerging markets, the MSCI EM Index rose by 2.3 per cent while its twin index for the frontier markets, the MSCI FM Index posted average gain of 2.3 per cent.
Market analysts attributed the global equities rally to optimism on the effective vaccine for the COVID-19 and the democratic process in the America and hopes of improvements in global cooperation.
The Nigerian market continued to enjoy increased domestic participation amid low yields in the fixed income market and positive earnings by quoted companies. Third quarter results of most quoted companies on the NSE showed stable to steady growths across key performance indices, fuelling expectations that dividend yields may offer substantially higher yields than coupon rates in the next earnings season.
The Federal Government during the week offered its monthly savings bond with yields generally below 2.8 per cent. The Federal Government of Nigeria Savings Bonds (FGNSB)’s N27.9 billion, two-year issuance with maturity on November 2022 carried a coupon of 1.76 per cent, lower than the 2.45 per cent rate for similar tenor issued in October 2020. Also, the N295.6 billion three-year FGNSB issuance with maturity in November 2023 carried a coupon of 2.76 per cent, considerably lower than 3.45 per cent for similar tenor issued in October 2020.
“While we anticipate profit-taking in the coming week, we expect the equities market to extend the bullish streak with mild gains,” Afrinvest Securities stated in a weekend note on the outlook for Nigerian equities this week.
Analysts at Cordros Securities said that in the short to medium term, there was still scope for expansion in valuation multiples as sub of one per cent yields on Nigerian Treasury Bills (NTBs) will continue to ensure realignment of portfolios in favour of equities.
Analysts noted that the market’s attention would be focused on the impending release of the third quarter results of Nigeria’s largest banks including FBN Holdings, United Bank for Africa (UBA), Guaranty Trust Bank, Access Bank and Zenith Bank.
“Considering the robust gains recorded across most counters over the past two months, we expect some profit-taking activities, albeit a short-lived one. We reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings,” Cordros Securities stated.
