Equities defy lockdown to post N896bn profit in April

• Uptrend in May, gloomy days beyond – experts

By Omobayo Azeez

Despite lockdown and near-shutdown state of the economy triggered by Coronavirus (Covid-19) pandemic, equity investments on the Nigerian Stock Exchange (NSE) soared by N896 billion in April.

The positive performance of the market also defied earlier predictions in many quarters that as Coronavirus cases more than double in April compared to March; the equities market was bound to record further slide.

Such predictions were however reversed by some developments in the market highlighted by analysts to include push for dividend yields, trapped funds of foreign investors and undervalued prices of blue-chip companies at the exchange.

Analysts have described the performance as impressive given that the equities market closed the first quarter (Q1) with a loss of N1.87 trillion, equivalent to 20.72 per cent.

The composite NSE All Share Index for the month of April gained 8.08 per cent to close at 23,021.01 points from the opening level of 21,300.47 points on April 1, 2020.

Similarly, market capitalisation for the period was up by N896 billion to close higher at N11.997 trillion on April 30, 2020, from an opening value of N11.101 trillion on April 1, 2020.

Sectoral analysis for the month as at April 24, 2020 showed positive performance except for NSE Oil and Gas and Industrial Goods indices which declined by 4.47 per cent and 2.20 per cent, respectively. The NSE Consumer Goods Index recorded the highest month-to-date as at April 24, 2020 return of 15.66 per cent.

The NSE Banking Index followed with a return of 10.89 per cent, while the NSE Premium Board Index rallied average gain of 10.28 per cent. The NSE 30 Index, which tracks the 30 most capitalised companies at the stock market, posted 7.27 per cent gain.

The NSE Pension Index appreciated by 5.41 per cent, Lotus II rose by 5.52 per cent, while the NSE Insurance Index posted a modest return of 0.80 per cent.

It will be recalled that to keep trading activities and ensure investors access to the market, management of the NSE activated the second phase of its continuity business plan on March 24, 2020 and has since been trading remotely.

Experts’ remarks

Speaking on the development, Ambrose Omordion, chief research analyst at InvestData Limited, said after the market had suffered 11-year low on the last trading day of March and the early week of April, the prices of stocks were undervalued and this attracted more funds.

He said this was again supported as investors jostled to position for dividend earnings in the months, thereby, leading to improvement in the prices of stocks with justifiably sound fundamentals.

According to a capital market analyst, Timi Olubiyi, the performance of the stock market in the month of April 2020 was surprisingly positive. “This could be attributed to the release of good end-of-the-year financial results by some of the listed companies along with improved dividend declarations in recent time.

“However more importantly, the performance can equally be attributed to intelligent investors and smart traders taken advantage of the current low prices of blue chip and value stock on the Exchange.”

In his remarks, Garba Kurfi, managing director of APT Securities Limited, emphasized that the trapped funds of foreign investors who encountered difficulties on their way to repatriate found their way back to the equities outlet and led to the rally.

Corroborating this, Omordion explained that after selling off their provisions in the market, the Import $ Export (I&E window) was not immediately available for the expatriates to continue to process their documents because of lockdown. “Instead of waiting endlessly, the quickly came back to the market and this jacked up the prices”.

Capital market analysts also noted that with the equities market performance in April showed that Nigerian funds are switching back to equities from fixed-income securities, hoping for a stock market rebound later in the year.

Mixed Outlook

Looking forward, analysts at InvestData said indication are rife that the Nigerian equities market will sustain its uptrend particularly in May, but with gloomy days ahead beyond the month.

According to Ambrose Omordion of InvestData, this is supported by the fact that most big companies listed on the bourse gave the month of May as their marked period for dividend payment.

“Anybody buying those stocks will get more value from dividend yield. This will keep many people in the market and also attract more funds; particularly most of the high dividend-yielding stocks are still undervalued.

“For instance, Dangote Cement is giving dividend of N15 and is selling around N130 per share. This represents almost 13 per cent dividend yield and this definitely is an attraction in to the market.

In another quarters however, experts warned that despite the gain recouped by investors on equities in April, and the one predicted to come in May, the uptrend may be short-lived to see a plunging numbers in the market for the rest of the year.

The analysts said given the high uncertainty around production and services, the crash in global oil prices, absence of positive market catalysts and the continued increase in the number of Covid-19 incidences in Nigeria a second recession in less than four years is likely and positive market performance is not sustainable.

Timi Olubiyi, spoke in line with this warned that if the spread of Covid-19 is not curtailed within a reasonable period, it might harm the performance of the NSE in the long run.

He added that the current performance data is yet to take into full account the effects of the lockdown, restrictions and weak economic data in the country.

He however said that mixed trading session and high price volatility might be experienced going forward because the current situation is highly unsustainable without government and regulators intervention.

“In anticipation, adequate policy responses are expected from the government and regulators to cushion the effect of the pandemic, provide market succor and to deepen market participation so that the positive market performance can be sustained achieved,” he said.

Similarly, analysts at Cordros Capital Research said, “as risks remain on the horizon, following the increasing number of COVID-19 cases in Nigeria and as economic fundamentals remain weak, we continue to advise investors to trade cautiously and seek only fundamentally justified stocks.”

Investments soar 1.87% to close week

Activities on the floor of the Nigerian Stock Exchange (NSE) closed positive last week as the NSE All-Share Index (ASI) and market capitalization both appreciated by 1.87 per cent to close the week at 23,021.01 basis points and N11.997 trillion respectively.

All other indices finished higher with the exception of NSE Meri Growth, NSE Consumer Goods and NSE Industrial Goods, which depreciated by 0.88 per cent, 1.42 per cent and 0.47 per cent respectively while the NSE ASeM index closed flat

The market opened for four trading days last week as the Federal Government of Nigeria declared Friday 1st May 2020 a Public Holiday to commemorate the 2020 Workers Day Celebration.

Meanwhile, a total turnover of 1.012 billion shares worth N9.892 billion in 17,023 deals were traded by investors in contrast to a total of 1.195 billion shares valued at N13.979 billion that exchanged hands the previous week in 20,591 deals.

In terms of trade volume, the financial services industry led the activity chart with 809.957 million shares valued at N5.666 billion traded in 9,533 deals; thus contributing 80.06 per cent and 57.28 per cent to the total equity turnover volume and value respectively.

The industrial goods industry followed with 47.884 million shares worth N1.681 billion in 1,920 deals while the third place was the conglomerates industry, with a turnover of 46.627 million shares worth N86.349 million in 550 deals.

Trading in the top three equities namely, FBN Holdings Plc, United Bank for Africa Plc and Access Bank Plc, measured by volume, accounted for 414.588 million shares worth N2.290 billion in 3,189 deals, contributing 40.98 per cent and  23.15 per cent to the total equity turnover volume and value respectively.