Investors earn N2.97tr in nine months

•Got N765b in three months

Equities’ investors at the stock market netted N765 billion in the three-month period that ended September 30, pushing the year-to-date gain for the first nine months of the year to N2.97 trillion.

Despite a recurring profit-taking trend that led to tepid performance in September, quoted equities drew on strong rallies in the early months of the third quarter to close the period positive.

Benchmark indices and sectoral trackers at the Nigerian Stock Exchange (NSE) indicated that Nigerian equities continued to outperform other classes of assets as historically low valuations, improved macroeconomic outlook and foreign exchange management sustained another quarter-on-quarter rally to push average year-to-date return by the nine-month period ended September 30, 2017 at 31.87 per cent.

While the profit-taking transactions had depressed most equities in the last month, most quoted equities still closed the third quarter at their four-year best performances with double-digit returns, ahead of inflation and benchmark interest rate. The average investors have seen their portfolios rising by almost a third while several investors are considerably higher than the average benchmark.

The nine-month average year-to-date return represents 15.87 percentage points and 17.87 percentage points above inflation rate and the Monetary Policy Rate (MPR)-interest rate benchmark, respectively. Adjusted for inflation and interest rate, the nominal real return stands positive at 1.87 per cent. Nigeria’s inflation rate stands at 16.0 per cent while the MPR is retained at 14 per cent.

Aggregate market value of all quoted equities on the NSE closed the third quarter at N12.217 trillion as against 2017’s opening value of N9.247 trillion, representing net capital gain of N2.97 trillion or 32.1 per cent. The All Share Index (ASI)-the benchmark index that doubles as sovereign equities index for Nigeria, crossed nine levels to close September at 35,439.98 points compared with its year’s opening index of 26,874.62 points, representing an increase of 31.87 per cent.

Investors in the banking sector continued to sustain their lead on the returns’ table with the NSE Banking Index indicating average year-to-date return of 60.46 per cent for the nine-month period. The NSE 30 Index, which tracks the 30 most capitalised companies, posted above average return of 35.75 per cent. The NSE Consumer Goods Index ended the period with 29.35 per cent. The NSE Industrial Goods Index trailed with 24.37 per cent while the NSE Insurance Index posted a return of 10.64 per cent. However, the NSE Oil and Gas Index recorded a negative return of -10.19 per cent as oil and gas stocks continued on downtrend.

The NSE Pension Index, which tracks stocks specially screened in line with pension investment guidelines, showed that pensioners might be in for wider dining tables with above-average return of 50.81 per cent. The NSE Lotus Islamic Index-which tracks stocks that comply with the Islamic law, recorded appreciable return of 21.01 per cent, underlining the attractiveness of ethical investment in the midst of the rally. The NSE Lotus Islamic Index excludes interest-based banks, breweries, gambling and overleveraged companies among others.

Quarter-on-quarter analysis showed that the ASI recorded average return of 7.01 per cent, suppressing a downtrend that saw a decline of 0.18 per cent in September. The overall market performance was driven by considerable rally in the consumer goods sector. The NSE Consumer Goods Index doubled the average performance with a return of 15.89 per cent. The NSE Banking Index followed with a gain of 10.6 per cent. The NSE 30 Index recorded three-month return of 7.84 per cent. The NSE Industrial Goods Index rose by 2.69 per cent while the NSE Insurance Index appreciated by 1.36 per cent. The NSE Pension Index and NSE Lotus Islamic Index rose by 5.52 per cent and 8.87 per cent respectively. The NSE Oil and Gas Index was the contrarian index, with a negative return of -13.1 per cent.

On a month-on-month basis, September was largely dominated by sell pressure as investors sought to monetise capital gains and locked in values into other equities and asset classes. The ASI slipped by 0.18 per cent during the month, driven largely by declines in the oil and gas, industrial goods and consumer goods sectors. The NSE Oil and Gas Index slumped by 6.05 per cent. The NSE Industrial Goods Index dropped by 3.30 per cent. The NSE Consumer Goods Index depreciated by 2.65 per cent while the NSE 30 Index dipped by 0.95 per cent. However, the NSE Insurance Index indicated resurgence with positive return of 1.59 per cent while the NSE Banking Index inched up by 0.11 per cent.

The third quarter performance of the equities market further consolidated the upswing that dominated the first half of the equities market. Investors had netted more than N2.2 trillion in capital gains in the first half of this year with most quoted equities closing the first half at their four-year best performances. The six-month average year-to-date return stood at 23.23 per cent, equivalent to net capital gain of N2.2 trillion.

Aggregate market value of all quoted equities closed the first half at N11.452 trillion while the ASI closed at 33,117.48 points.

The sustained rebound in the equities market so far this year represents a major recovery for hard-pressed Nigerian investors, who had lost N3.98 trillion in the past three years. The stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion. Aggregate market value of all quoted equities on the NSE closed 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.

Meanwhile, total turnover at the NSE last week stood at 1.33 billion shares worth N14.09 billion in 14,703 deals as against a total of 1.1 billion shares valued at N17.86 billion traded in 16,070 deals in the previous week. The financial services sector remained atop activity chart with 1.06 billion shares valued at N7.34 billion in 8,202 deals; representing 80 per cent and 52.1 per cent of the total equity turnover volume and value respectively. The industrial goods sector staged a distant second with 91.35 million shares worth N2.78 billion in 933 deals. The consumer goods sector placed third with a turnover of 70.19 million shares worth N3.4 billion in 2,719 deals.

The three most active stocks were Continental Reinsurance Plc, Sterling Bank Plc and Access Bank Plc, which jointly accounted for 412.84 million shares worth N1.49 billion in 817 deals, representing 31.14 per cent and 10.55 per cent of the total equity turnover volume and value respectively.

Also traded during the week were a total of 274 units of Exchange Traded Products (ETPs) valued at N636,148 in 18 deals compared with a total of 58 units valued at N90,475 traded in five deals in the previous week.

A total of 7,424 units of Federal Government bonds valued at N6.689 million were also traded last week in 18 deals compared with a total of 178 units valued at N163,407 traded in two deals two weeks ago.

Market analysts remained optimistic on the performance of the equities market as many companies indicated their third quarter earnings report might be ready this month.

“In the coming week, we believe market performance will be majorly driven by investors’ expectation of third quarter 2017 report card. Nonetheless, we advise investors to stay bullish on stocks with sound fundamentals,” Afrinvest Securities stated.

Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said the recovery at the stock market was a response to positive changes in the polity noting that the stock market performance usually aligns with macroeconomic outlook.

According to him, the stock market had remained depressed in the first quarter under poor liquidity amidst uncertain and unrealistic foreign exchange management. But the market turned round in the second quarter with the changes in the foreign exchange management and improvement in macroeconomic coordination.

Chukwu said the market recovery was boosted by the introduction of the Investors and Exporters’ foreign exchange window and the narrowing of exchange rates between official and parallel rates due to policy stimulation by the Central Bank of Nigeria (CBN).

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