Equities Push Global Slump With N1.17trn Gain In One Week

Nigerian equities closed weekend with net capital gains of N1.17 trillion, playing the contrarian in a week that saw most global markets posting significant losses.

Benchmark indices at the stock market indicated average return of 4.25 per cent last week, equivalent to net capital gains of N1.166 trillion. The rally last week, the fifth consecutive positive week, tickled Nigeria’s average year-to-date for quoted equities to 24.30 per cent.

Aggregate market value of all quoted on the Nigerian Exchange Limited (NGX) closed weekend at N28.626 trillion as against the week’s opening value of N27.460 trillion, an increase of N1.166 trillion.The All Share Index (ASI)- the value-based common index that tracks all share prices at the NGX, rose from its week’s opening index of 50,935.03 points to close weekend at 53,098.46 points.

The running bullish rally at the stock market counteracted the general negative sentiment across the global markets. In United States (U.S.), the Dow Jones Industrial Average (DJIA) depreciated by 3.6 per cent while the S & P 500 Index declined by 4.7 per cent. United Kingdom’s FTSE 100 Index posted average loss of 0.9 per cent.

Europe’s broad tracker- STOXX Europe, dipped by 0.4 per cent. Japan’s Nikkei 225 Index signposted the Asian markets with average loss of 2.1 per cent. The MSCI EM Index- which tracks global emerging markets, depreciated by 4.2 per cent while its twin index, the MSCI FM Index- which tracks frontier markets, posted average loss of 5.0 per cent.

Pricing trend analysis at the Nigerian stock market showed that the overall market performance was driven by widespread appetite for Nigerian equities across the sectors. The NGX 30 Index, which tracks 30 largest stocks, posted above-average gain of 5.72 per cent. Oil and gas stocks led the rally with average gain of 6.94 per cent. The NGX Consumer Goods Index followed with average return of 5.38 per cent. NGX Industrial Goods Index appreciated by 2.33 per cent while the NGX Banking Index inched up by 0.04 per cent. The NGX Pension Index- which tracks stocks specially screened in line with pension funds investment guidelines, rose by 4.08 per cent. The market’s main ethical index, the NGX Lotus Islamic Index, which tracks stocks that comply with Islamic rules on investments, recorded above-average return of 7.14 per cent.

With 50 gainers to 32 losers, several stocks rallied to their all-time highest price at the weekend. In percentage terms, McNichols recorded the highest gain of 59.52 per cent to close at N1.34 per share. Royal Exchange trailed with a gain of 51.49 per cent to close at N1.53 per share. Champion Breweries rose by 30.84 per cent to close at N4.37. International Breweries trailed with a gain of 30.37 per cent to close at N8.80 while Okomu Oil Palm rallied 26.47 per cent to close at N215 per share.

On the negative side, Academy Press led the losers with a drop of 13.71 per cent to close at N1.51. Ikeja Hotel followed with a loss of 10.94 per cent to close at N1.14. Guinness Nigeria declined by 10.91 per cent to close at N98. Tripple Gee and Company dipped by 9.38 per cent to close at 87 kobo while Caverton Offshore Support Group dropped by 9.09 per cent to close at N1.20 per share.

The momentum of activities also improved significantly with a total turnover of 1.816 billion shares worth N27.194 billion in 36,286 deals last week as against 1.598 billion shares valued at N19.603 billion traded in 21,494 deals two weeks ago.

Sectoral breakdown indicated that the banking-led financial services sector remained the most active with 904.860 million shares valued at N8.498 billion in 12,883 deals, representing 49.82 per cent and 31.25 per cent of the total equity turnover volume and value respectively. The conglomerates sector occupied a distant second with 263.830 million shares worth N540.313 million in 1,651 deals while the consumer goods sector placed third with a turnover of 238.964 million shares worth N5.816 billion in 7,635 deals.

The three most active stocks were Transnational Corporation of Nigeria, Guaranty Trust Holding Company and Jaiz Bank. The three most active stocks accounted for 459.179 million shares worth N3.294 billion in 3,645 deals, representing 25.28 per cent and 12.11 per cent of the total equity turnover volume and value respectively.

Analysts at Cordros Securities said they expected a moderation in price rally as investors seek to lock in profit from the five-week bullish run in the market.

“Thus, we see more of a “choppy theme” as cautious trading takes center stage ahead of the Monetary Policy Committee (MPC) meeting scheduled later in the month. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings,” Cordros Securities stated in a weekend note to investors.

Meanwhile, in their latest review of Nigerian equities, analysts at FSDH Securities said Nigerian equities have further room for upside, particularly among fast moving consumer goods (FMCG) companies which have been able to finally pass on more cost increases to consumers.

In the report titled “FSDH Top Pick”, analysts said they remained bullish on upstream oil and gas companies and oil palm companies, following Indonesia’s decision to ban exports of palm olein which is expected to trigger a surge in CPO prices.

“Clearly the trend of activities in the equities market has changed as domestic institutional investors are now taking bigger bets on Nigerian equities following expectations of prolonged bearish sentiments in the bonds market.

“This narrative will likely continue for an extended period as bond yields are projected to continue the uptrend which would cause institutional investors to raise allocations to equities, particularly as new funds flow into the market. However, we advise investors to exercise patience and wait for the recent rally to cool off before taking positions in the market, as the market is over-stretched in the short term,” FSDH stated.

The report selected 10 stocks which could yield above-average returns for investors. These included Unilever Nigeria, Lafarge Africa, Nigerian Breweries, International Breweries, Seplat Energies, Flour Mills of Nigeria, Transnational Corporation of Nigeria, Ecobank Transnational Incorporated, MTN Nigeria Communications and Okomu Oil Palm.

The report noted that Nigerian equities market had extended its stellar 2022 performance into April as investors were in upbeat mood, aggressively taking positions in the equities market particularly with a focus on consumer goods names as well as oil palm companies.

According to the report, the improved sentiments was first kicked off by dividend reinvesting activities by investors but was further spurred on by the outstanding first quarter 2022 earnings season.

The report outlined that impressive outings from companies like Okomu, Guinness Nigeria, Nigerian Breweries, Unilever Nigeria and Lafarge Africa among others triggered a buying spree as investors’ interest notched a new level.

Overall, the benchmark All Share Index (ASI) gained 5.7 per cent in April to close the month at 49,638.94 points. The rally in the Nigerian equities market was broad based as all major sectors closed higher. The rally was led by the oil and gas sector with average gain of 19.1 per cent in April 2022.

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The report noted that the rally in oil and gas stocks was reflective of the bullish sentiments in the crude oil market, particularly for Seplat Energies which was also expected to make a quarterly dividend payment. In addition, announcement of a board meeting by Oando triggered a buying spree in the stock.

The report pointed out that a solid outing for FMCG stocks in first quarter 2022 earnings season bolstered the performance of the consumer goods sector which gained 11.5 per cent in April 2022.

Meanwhile, global equities market kickstarted second quarter 2022 on a bearish note as fears of a surge in interest rates underpinned risk-off sentiments towards equities. This was broadly in line with FSDH’s outlook for the month of April as only one of the equity indices tracked across United States (US)and European equities market closed northwards in April.

“Heading into May, we continue to advise investors to underweight exposure to stocks for developed economies. This is premised on the expectations of further downside in the US and European markets. Following the FOMC’s decision to hike interest rates by a further 50 basis points-largest move since 2000, we expect investors to remain on the edge as they price in further rate hikes for the rest of the year,” FSDH stated.