Equities bullish on IMF fund, cheap asset prices, easing lockdown

• As investors close week with N534bn profit
• Bulls dominate global

By Omobayo Azeez

As against the negative indication of being positive of the Coronavirus pandemic, the Nigerian equity market closed activities on a positive note last week as investors recouped total profit of N534 billion.

Analysts in the capital market remarked that the development was made possible by factors such as cheap prices of the some assets in the market, inflow of budget facilities from the International Monetary Fund (IMF), gradual easing of lockdown in the country, among others.

Announcement by the IMF last week that it has disbursed $3.4 billion emergency fund to the Central Bank of Nigeria (CBN) followed an earlier move by the federal government to ease lockdown in various areas of the country, especially in Lagos, Ogun and the Federal Capital Territory, Abuja.

These factors collectively reinvigorated the thirst for trading on the floor of the Nigerian Stock Exchange (NSE), especially at a time when many stocks with sound fundamentals are yielding high despite trading at undervalued prices.

Consequent of the gain, the The NSE All-Share Index (ASI) added 1,024.39 points, equivalent to 4.45 per cent and market capitalization soared in the same percentage to close the week higher at 24,045.40 basis points and N12.531 trillion respectively.

All other indices finished higher as gains in bellwether stocks spurred gains in all sector indices in the week with the exception of NSE ASeM, which depreciated by 0.18 and consequently, the year-to-date (YTD) loss moderated to -10.4 per cent.

Analysts at Investdata explained that the market had mixed sentiment during the week, extending its gaining streak with the key performance index closing higher on a reducing magnitude of gains, but very high traded volume.

Ambrose Omordion, chief research officer at Investdata counseled investors to keep abreast what is currently happening to the Nigerian market and economic fundamentals, alongside emerging global events and data.

“To identify real opportunities for superior investment or trade, investors must be aware of what is happening in the environment, by filtering the market noise and media-induced fear or hype.”

“Obviously, the market is still very bullish in terms of the current overall market trend, but technical tools signal a short-term overbought in this recovery move, indicating that a pullback is underway in form profit-taking or short-term price correction.

“Our time frame did support a bullish transition within this long-term bearish bull rally on the NSE. There is an opportunity to take a bullish trade within a long bearish index movement, but there must be a good exit strategy at every moment of the season,” Omordion advised.

He noted also that investors and traders are positioning amidst the changing sentiments in the hope of improved liquidity and positive economic indices that may reverse the current trend.

“We see investors focusing on the upcoming full-year earnings season, targeting companies with strong potentials to grow their dividend on the strength of their earnings capacity,” he said.

On their part, analysts at Cordros Research said, “In our opinion, risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions. Thus, we continue to advise investors to trade cautiously and seek trading opportunities in only fundamentally justified stocks.”

Trading data

A total turnover of 1.662 billion shares worth N18.205 billion in 28,791 deals were traded during the week by investors on the floor of the Exchange, in contrast to a total of 1.012 billion shares valued at N9.892 billion that exchanged hands previously in 17,023 deals.

The financial services industry, measured by volume, led the activity chart with 1.385 billion shares valued at N11.813 billion traded in 17,117 deals; thus contributing 83.35 per cent and 64.89 per cent to the total equity turnover volume and value respectively.

The Services industry followed with 53.551 million shares worth N128.065 million in 1,003 deals while the third place was the Consumer Goods industry, with a turnover of 53.444 million shares worth N2.780 billion in 3,607 deals.

Trading in the top three equities namely, FBN Holdings Plc, Guaranty Trust Bank and ZenithBank Plc, measured by volume, accounted for 774.294 million shares worth N9.796 billion in 7,516 deals, contributing 46.59 per cent and 53.81 per cent to the total equity turnover volume and value respectively.

Similarly, investors traded a total of 17,476 units of ETPs valued at N1.502 million were during the week in 10 deals, compared with a total of 200,104 valued at N2.264 million transacted in the preceding week in 12 deals.

Global equities rally

Meanwhile, the trend in Nigeria was not alone as global equities sentiments were also positive, as economies around the world move to ease respective lockdowns, alongside mixed economic and earnings data.

Particularly, stocks in the United State comprising DJIA and S&P moved up by 0.6 per cent and 1.8 per cent respectively to close higher, as the US and China pledged to meet their trade deal obligations.

Similarly, European equities (STOXX: +0.9 per cent; FTSE 100: 3.0 per cent) reacted positively to news of improving US-China relations.

Investors in Europe are also expecting a recovery in global growth as economies around the world tout lockdown easing measures.

Asian equities (SSE: 1.2 per cent; Nikkei 225: 2.9 per cent) were also buoyed by optimism surrounding improving Sino-US relations.

On the other hand, the MSCI EM index was negative by -2.2 per cent, following -0.1 per cent, -0.8 per cent and -6.2 declines in South Korean, Taiwanese and Indian equities market respectively.