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Chinwendu Obienyi
The month of April and May may have been considered an uncertain period for businesses, given the prevalence of the COVID-19 pandemic, but it turned out to be a blessing in disguise for equity investors.
Despite the surge in COVID-19 cases in Nigeria, investors still gained a total value of N2.07 trillion in two months.
The market had lost N1.87 trillion at the end of the first quarter (Q1) of 2020, but following witnessing varying degrees of growth in some share price as well as in their financial results, the market capitalisation garnered some momentum.
Daily Sun investigations revealed that the domestic bourse’s value for the month of April 2020 increased by N1 trillion from an opening value of N11.1trillion to close at N11.997 trillion while N1.17 trillion was gained in May to close at N13.168 trillion.
This means that investors pocketed a gain of N2.07 trillion in two months while the All Share Index (ASI) garnered 3,967.35 basis points to close at 25,267.82 points from N21,300.47 points recorded in March.
A further review of the market showed that the NSE 30, which tracks the 30 most capped stocks on the bourse, returned 11.05 per cent month-to-month to investors in May 2020 (April 2020: 9.4 per cent), albeit -7.16 per cent year-to-date (ytd).
This came as a result of the rebound in oil prices as well as the receipt of $3.4 billion IMF facility, salvaging Nigeria’s external reserves. The overall economy had expanded by 1.87 per cent in the first quarter of 2020 amidst the impact of the pandemic, defying most analysts’ expectations and projections.
Currently, the market’s ytd stands at -6.2 per cent but there is no gainsaying that after months of uncertainties, drop in oil prices and total lockdown, the feel-good factor is slowly slipping into the nation’s bourse.
Analysts who spoke to Daily Sun via a telephone chat, explained that the gains recorded in the equities market over the last two months was simply as a result of the recovery seen in various economic factors which triggered the panic selling in March.
They however, noted that the equities market would slowly become more and more attractive provided the Federal Government look for more ways to manage the virus and keep business activities running.
Head of Research at FSL Securities, Victor Chiazor, believes that recovery in oil prices, country reserves, relatively decent first quarter results, had an impact on investors’ confidence which made them return back to the market.
“With the confirmation of the COVID-19 index case in the country and the expected total lock down of economic activities, the drop in oil prices which impacted the country’s revenue as well as the continuous drop in our foreign reserves due to pressures from Foreign Portfolio Investors over fears of the country’s ability to meet its FX needs and fears over a further devaluation were all factors that drove the equities market lower.
However, we have seen a quick turn of events as oil prices have continued to recover, the country foreign reserves have also seen some accretion over the last two months while the foreign exchange market has been relatively stable all of which have improved investors’ confidence to return back to the market. The lifting of the lock down as well as a few relatively decent first quarter results by some of the listed companies have also increased interest in the equities space especially given the low valuations of blue chip companies at the time”.
According to him, “we believe the equities market will become more and more attractive to investors especially given the continuous drop in interest rates which is expected to gradually drive investments away from the fixed income space as investors begin to hunt for alpha returns given the rise in inflation”.
For her part, Head, Retail Business at CSL Stockbrokers Limited, Ifeoma Ukwunna, said even though the market was in a negative territory, it presented an opportunity for other investors buy up value stocks; including a lot of the banking stocks.
However, she forewarned that the rally may not be sustainable while adding that investors might be cautious especially with the IMF’s call for banks to halt payment of dividend.
“We doubt the trend will be sustained going into this quarter, with the IMF’s call for banks to call off dividend payments. The CBN hasn’t said anything to the effect as there are already existing conditions to be met for dividend payments. Investors will react negatively if the CBN advocates the same”, Ukwunna said.
