The Nigerian stock market has recovered from the prolonged negative returns year to date as the market hits its 10th straight bullish session on Friday, October 2nd, 2020. Year to date the, All Share Index grew by 0.54% and Market Capitalisation appreciated by 8.85% to settle at 26,985.77 points and N14.105 trillion respectively.
This significant improvement has wiped off the losses recorded since March 2020. The market returned, -20.65% in March, -14.24% in April, -5.86% in May and -8.8% in June. In July it was -8.0%, and -5.64% in August. The current market recovery can be attributed to the ongoing bullish trend precisely from 18th of September till 2nd of October 2020.
The four heavy weight stocks that determine the direction of the market emerged among gainers year to date. BUA Cement grew its share price by 130.66% to N41.75 from N18.1. Airtel grew its share price by 27.13% to N380 from N298.9. MTN grew its share price by 23.81% from N105 to N130. Dangote Cement grew its share price by 1.41% to N144 from N142.
Neimeth Pharmaceuticals led other gainers with 190.32% growth in its share price year to date. The price of the stock moved from N0.62 at the close of trade in December 31, 2019 to N1.80 at the close of trade in October 2, 2020.
Law Union and Rocks Insurance is the second on gainers list as the share price of the underwriting firm grew by 132% from N0.5 to N1.16.
BUA Cement is third on the list of gainers year to date as its share price grew by 130.66% to N41.75 from N18.1.
Other among top ten gainers year to date include: May & Baker (50.26%), Cornerstone Insurance (46.67%), Okomu Oil (43.88%), Ekocorps (41.18%), United Capital (39.17%), FTN Cocoa (30%) and Vita foam (29.55%).
Reacting to the market performance, Aruna Kebira, Chief Dealer of Global View Capital Limited stated thus:
“Impressive performance in the market is not far fetch from the fact that Q3 earnings is around the corner. Another obvious reason is the drop in money market rate as a result of drop in MPR by the Monetary Policy Committee to 11.5% from 12.5% and further reduction of interest on savings. What the government had in mind is to stimulate the real sector (manufacturing sector). They want to make cost of fund to be cheap. That is why they are trying to discourage savings and encourage investment. So instead of people keeping the money, they rather put it to work which is a better option. As far as these rates are low, the capital market will thrive. There is this circular flow of funds; when the rates are better in money market, people move funds from capital market to the money market; when the rate is now better for capital market, people move funds from money market to the capital market.”
Should we expect more bulls?
September is the end of third quarter. Between now and October ending, Q3 results will be released to the market. With Q3 result, one can project what will happen at the year end. So people are taking position against Q3 result and against year-end purposely for dividend. I am not sure we will see slowdown in the market. Even if there is slow down, the prices cannot return back to where they were, majorly after covid-19.
Advice for Investors is to start taking position in fundamentally strong stocks which include: Guaranty Trust Bank, Zenith Bank, Access Bank, FBNH, UBA, Fidelity, MTN, Dangote Cement and WAPCO among others.
There is no permanent good stock, there is no permanent bad stock. One can make reference to their trailing earnings; that is Q1, Q2 and Q3. If the trail is negative or not fantastic, it means that at Q4, they will not do anything. But when there is growth in Q1, Q2 and Q3, there is every possibility that there will be growth in Q4.
Look at the trailing earnings, that is, what has it been from January till now. It will guide you accordingly.
GAINERS (YEAR TO DATE)
