Inflation to stimulate money flow into equities assets, say analysts

• As market posts highest gain in 7 weeks; 94% rise in turnover

By Omobayo Azeez

A massive inflow of funds into equities investment has been envisaged by analysts on the back of rising inflation that is exerting negative impacts on other investment windows.

The market analysts say they expect investors to bank on equities despite its volatility at the current economic state, as they rate it for better return on investment compared to other investment outlets.

“We expect inflow into equity assets as rising inflation threatens other investment windows returns in the midst of more earnings being released to the market, positive news of Coronavirus vaccine on oil price and impact of CBN policies on the economy,” said investment analysts at Investdata Consulting Limited.

This however is just as investors are equally worried about inconsistent government policies which have continued to dampen confidence.

The stock market rebounded last week with investors recouping profit to the tune of N73 billion, equivalent to 0.58 per cent, breaking the market’s losing streak.

Although, sentiments remained weak in the domestic market, amidst rising COVID-19 cases in the country, as well as persisting FX illiquidity, a one-off gain on Thursday, driven by a 6.5 per cent surge in DANGCEM, led the domestic bourse to its largest weekly gain in seven weeks.

Consequently, the NSE All-Share Index (ASI) and market capitalization both appreciated by 0.58 per cent to close the week at 24,427.73 and N12.743 trillion respectively.

All other indices finished higher with the exception of NSE-Main Board, NSE Banking, NSE Insurance, NSE AFR Bank Value, NSE AFR Div Yield, NSE MERI Value, NSE Consumer Goods and NSE Oil/Gas Indices which depreciated by 1.04 per cent, 0.62 per cent, 0.80 per cent, 0.38 per cent, 0.69 per cent, 1.45 per cent, 0.38 per cent and 4.67 per cent respectively, while NSE ASeM closed flat.

Analysts at Cordros Capital counselled cautious trading owing to the fact the gains recorded during the week were not broad-based.

“We reiterate that 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 seek trading opportunities in only fundamentally justified stocks,” they maintained in their appraisal of the last trading week.

Meanwhile, Ambrose Omordion, chief analyst at Investdata explained that the money flow index has continued to look up at 38.83 despite flowing from one sector to the other, seeking value in terms of low prices with high upside potentials.

At the close of the market, a total turnover of 1.350 billion shares worth N14.433 billion in 16,723 deals were traded this week by investors on the floor of the Exchange, in contrast to a total of 1.016 billion shares valued at N7.436 billion that exchanged hands the previous week in 18,092 deals.

This indicated impressive participation and activity level as traded volume and value soared significantly by 32.87 per cent and 94.1 per cent respectively.

The financial services industry, measured by volume, led the activity chart with 847.677 million shares valued at N5.649 billion traded in 9,068 deals; thus contributing 62.77 per cent and 39.14 per cent to the total equity turnover volume and value respectively.

The Nigerian Stock Exchange’s (NSE’s) data showed that the conglomerates industry followed with 176.425 million shares worth N821.337 million in 400 deals.

The third subsector was the consumer goods industry, with a turnover of 158.022 million shares worth N3.768 billion in 2,563 deals.

In terms of traded volume, trading in the top three equities namely FBN Holdings Plc, UACN Plc and United Bank for Africa Plc accounted for 434.502 million shares worth N2.408 billion in 2,270 deals, contributing 32.18 per cent and 16.68 per cent to the total equity turnover volume and value respectively.

Investors also traded a total of 53,420 units of ETFs valued at N444.544 million last week in 14 deals, compared with a total of 106,450 units valued at N117.642 million transacted the preceding week in 4 deals.

Similarly, a total of 1,747 bond units valued at N1.985 million were traded in eight deals compared with a total of 2,408 units valued at N2.614 million transacted previously week in nine deals.