Happy new year to our esteemed readers. We are glad you made it to year 2021 despite the obvious turbulence of 2020. We wish you a very bullish new year.
The Nigerian equity market in 2020 experienced a dramatic turnaround despite the obvious challenges that plagued the entire world economies caused by COVID-19 pandemic. Businesses across the globe were shut down in a bid to curtail the deadly virus.
As at March 2020 when lockdown started, our market has a return of -20.65%. One would expect a further decline in the market due to the obvious economic realities. In April, the market improved, returning –14.24%. In May it improved to -5.86% and -8.8% in June. In July it was -8.0%, and -5.64% in August.
Precisely on the 2nd of October 2020, the market recovered totally recovered from its negative returns to 0.54%. From that time till date, the market has been forward looking with geometric growth. Year to date, the market has returned 50.03% with the All Share Index at 40,270.72 points and the market capitalisation at N21.057 trillion. As a matter of fact, NSE is currently ranked as the world best performing stock market.
Going by the current lower rate regime in the money market and fixed income space, forward looking oil price and other impressive moves by the government to stimulate the real sector of the economy, we could say that the market is bound to sustain its positive vibration at least till the end of first quarter of 2021.
Commenting on the market outlook in 2021, Aruna Kebira, Chief Dealer of Global View Capital Limited stated thus:
“Irrespective of whatever people are saying, I believe that the market will sustain its positive vibration till end of Q1. Even if the market is going to correct itself, it will be after dividend declaration period. As at 31 December, 2020, I understand that our reserves are growing. The only thing that may hamper the market is one, if the CBN review the rates in the money market. Second, if OPEC + decides not to honour the deals concerning oil.”
“As far as we know, the budget has been signed, last Thursday, the border has been opened, which means that the cost of food items will drop which will bring down the inflation rate. If CBN retains MPR at 11.5% and retains other rates the way they are, then the market is good for it.”
The truth is that, the government is not trying to help the market. Their main objective is to kick-start the real sector of the economy. It is the reverberating effect that we are seeing on the Nigerian Stock Exchange. It is not as if, they will now come back and say, the stock exchange has done 50% we don’t want it to go beyond that, let us go back. They are not helping the stock exchange. As far as they want to kick-start the real economy and bring interest rate down to the level that it has been, I don’t see why the stock exchange should not be a net beneficiary.
Looking at the monthly Domestic and FPI report by NSE, local participation has surpassed foreign participation a very long time ago. The PFAs and others are the ones moving the market. So where are they moving the money to? As far as there still money to make in the capital market, the capital market will continue to go up.
There could be market correction, but not before dividend declaration. By the time it’s getting to dividend declaration period, we will see market rally. The market might be stagnant at a particular time. What is happening now happened in 2018. In 2017, the market gained like this; then January 2018, the market flew like never before. I’m expecting that from January 4, we are going to see an unprecedented movement in the market. That can last till the middle of January or January ending, then the market can begin to correct itself.”
STOCKS TO WATCH
DANGOTE CEMENT
Dangote Cement commenced its share buyback program on 30th December 2020. Investors in Dangote Cement will be better off at the end of the share buyback programme. The share buyback programme will reduce the Company’s Share Outstanding. The earnings per share will go up and the price will also go up. Improved earnings per share will bring about improved dividend payout going forward. Year to date, the share price of Dangote Cement grew by 72.46% to N244.9 from N142 at the beginning of year 2020. After the share buyback of Dangote Cement, the share price has the capacity to move close to N300.
BUA CEMENT
BUA Cement is among the heavy weight stocks on NSE with the market capitalisation of N2.62 trillion. The share price of BUA Cement has moved from N50 to N77.35. Year to date, it grew by 327.35% from N18.10 at the beginning of year 2020 to close the year 2020 at N77.35. It emerged second on the gainers’ list year to date after Sunu Assurance Plc that grew by 400% from 20 kobo to N1. On the technical chart, a strong BUY is recommended for BUA Cement by MACD, Stochastic and RSI.
WAPCO
WAPCO is currently trading at N21.05. It is trading 19.04% away from its 52 weeks high of N26, which implies an uptrend potential for the share price of the company. Two years back, it traded at N52 and that shows that it has not reached anywhere.
ZENITH BANK
Zenith Bank closed the year 2020 at N24.80 with 33.33% growth year to date from N18.60. It is trading 12.98% away from its 52 weeks high of N28.5. The share price of Zenith Bank has uptrend potential as the market anticipate dividend declaration period. The dividend yield of Zenith Bank is about the best in the market.
FBN HOLDINGS
The big elephant closed year 2020 at N7.15 with a growth of 16.26% year to date from N6.15. It is trading 20.56% away from its 52 weeks high of N9 which implies an uptrend potential for the share price of the big elephant.
ACCESS BANK
Access Bank is currently trading at N8.45. It is trading 29.58% away from its 52 weeks high of N12. At that, there is uptrend potential in the share price of Access Bank.
UBA
UBA grew its share price by 20.98% in 2020 to N8.65 from N7.15. It is trading 11.73% away from its 52 weeks high of N9.8. There is growth potential in the share price of the bank.
GUARANTY TRUST BANK
Guaranty Trust Bank grew its share price by 8.92% in 2020 to N32.35 from N29.7. It is trading 15.86% away from its 52 weeks high of N38.45, which suggest an uptrend potential for the share price of Guaranty Trust Bank.
Investors should continue to pitch their tent with fundamentally sound stocks. As the market anticipates dividends declaration season, it is advised to take advantage of stocks with good dividend yield.