Securities: Investors gross N1.93tr in October

Chinwendu Obienyi

On the back of positive sentiment surrounding third quarter (Q3) 2020 earnings, investors trading on the floor of the Nigerian Stock Exchange (NSE), pocketed a gain of N1.93 trillion in the month of October.

Analysis showed that he market capitalisation, which opened the month at N14.027 trillion, closed at N15.957 trillion, despite falling oil prices, weak Naira/ U.S dollar exchange rate  as well as the social unrest in the country.

The All Share Index (ASI), which opened the month at 26,831.76 points, broke through the 30,000 mark, a level last seen in June 2019, and closed at 30,530.69 points, the highest level in 15 months.

According to market operators, the positive performance of the market was linked to bargain hunting, increased domestic participation and investors positioning ahead of corporate results for Q3 results.

Further investigations revealed that the total value of stocks traded in the month of September grew by 42.9 per cent, month-on-month (m/m), to N135 billion in September 2020, from N94.50 billion in August 2020. This was largely driven by transactions executed by domestic investors (+71.1 per cent m/m to N94.90 billion) compared to foreign investors (+2.7 per cent m/m to N40.10 billion), suggesting that the gain in October would have been driven by domestic investors.

However, analysts at Cordros Capital, noted that they had anticipated a knee jerk reaction from investors due to the social unrest in the month under review while adding that the lingering liquidity constraints in the FX market as well as bargain hunting by domestic investors seeking alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market contributed to the gain in October.

“We expect the direction of market performance to be shaped by the ongoing Q3 earnings season as investors look for evidence that the relaxation of lockdown has provided a tailwind for corporate earnings. With yields on risk-free assets declining to sub 1 per cent levels, we believe it is increasingly compelling for risk-averse investors to rotate their portfolio towards equities. Hence, we expect the bulls to maintain dominance in the week ahead.

Though non-bank domestic investors received the last of their OMO maturities at the end of October, we expect them to continue to dictate the tempo of activities in the local bourse, as positioning for FY 2020 dividends will spur portfolio rebalancing activities amid the depressed yield environment”, they said.

For their part, Afrinvest, in its weekly assessment of the market, said, with a fragile external sector bogging the nation’s economy, they expect to see slight profit-taking at the start of the week.

Currently, the year-to-date (ytd) return stands at 13.74 per cent after some form of bullish momentum from the previous week was sustained as investors continued to react to better than expected earnings and bargain-buy relatively cheap stocks at the close of transactions on Friday.

Notably, investors’ interest in Nestle, BUA Cement, GT Bank, Dangote Cement and Stanbic drove index 6.39 per cent higher, resulting in its sixth-consecutive weekly gain.

Meanwhile , a total turnover of 1.909 billion shares worth N23.610 billion in 23,578 deals were traded by investors as against a total of 1.505 billion shares valued at N19.668 billion that exchanged hands last week in 20,552 deals in the previous week.

The Financial Services industry (measured by volume) led the activity chart with 1.478 billion shares valued at N15.576 billion traded in 12,546 deals; thus contributing 77.41 and 65.97 per cent to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 131.788 million shares worth N2.613 billion in 4,112 deals while Industrial Goods recorded a turnover of 83.526 million shares worth N3.573 billion in 1,818 deals.

Trading in the top three equities namely FBN Holding Plc, Zenith Bank Plc and Access Bank Plc (measured by volume) accounted for 576.514 million shares worth N6.791 billion in 4,652 deals, contributing 30.19 and 28.76 per cent to the total equity turnover volume and value respectively.