The market capitalisation of the Nigerian Stock Nigerian (NSE), which is the total value of all listed equities, hit a historic peak of N20.281 trillion yesterday, as investors increased demand for stocks to reposition for year-end seasonal trends and the much expected economic recovery in 2021.
This is the highest the market would record since 2008 when it peaked at N12.3 trillion before the meltdown. That meltdown brought the market value to about N6 trillion before it started recovery in later years.
However, the listing of Dangote Cement Plc in 2010 significantly lifted the market. The listing of MTN Nigeria Plc, Airtel Africa Plc last year and BUA Cement Plc early this year added more boost to capitalisation of the exchange, which set the pace for yesterday’s historic peak.
The market, which gained N1.334 trillion last week, consolidated on the positive performance this week by gaining N1.048 trillion in three days to close yesterday at N20.281 trillion.
The market capitalisation grew from N19.236 trillion to N20.281 trillion or 5.4 per cent in three days, while the NSE All-Share Index appreciated from 36,804.75 to 38,803.74.
After gaining N1.334 trillion last week, market analysts were upbeat that the market would remain bullish this week.
According to analysts at Greenwich Trust Research, “the market will likely remain upbeat buoyed by end-of-year portfolio re-balancing by fund managers, or even the “Santa-Rally”. We, however, do not rule out intermittent profit-taking that could slow down the uptrend in the market.”
Similarly, analysts at Cordros Research said in the short term, they still see scope for expansion in valuation multiples as the hunt for alpha-yielding opportunities, in the face of increasingly negative real returns in the fixed income market, remains positive for stocks.
Analysts at InvestData Consulting said there have been positive sentiments for value, growth and highly capitalised stocks with attractive valuation, as investors reposition for year-end seasonal trends and the much expected economic recovery in 2021.
“The bull run shows that smart money is still in the market. The ongoing Santa Claus rally is attributed to window dressing for year-end among institutional investors, even as bonuses are entering the market ahead of the New Year, as some investors are taking advantage of the tax code by selling positions they have taken losses at the end of December to buy-back in January,” they said.
The analysts said although the inflationary trend remains a source of serious concern across the country, the equity market has so far provided a safe haven, with the NSE ASI returning 44.7 per cent year-to-date, remaining the only investment window that has outperformed inflation.
“The news of the federal government ordering the reopening of the nation’s borders is expected to add more momentum to factors driving the equity prices, going forward. Such factors, including the high liquidity in the system, low yields environment in the fixed income market, uptrend in oil price, the discovery of a vaccine for COVID-19, and the expected early passage of the 2021 budget have supported the positive sentiment in the market so far,” InvestDat said.
Commenting on the last week’s market performance, a stockbroker and Chief Executive Officer, Sofunix Investment and Communications Limited, Mr. Sola Oni, had said investment in money market instruments and fixed income securities were not attractive because of their negative returns due to low yield and double-digit inflation.
“Investors would naturally opt for where they can generate optimal profit.
At the moment, equities are about the major option that can meet investment objectives of many discerning investors. Our stock market is forward looking. Investors have realised that third quarter (Q3) results of many companies have signalled better performance for the year end results, which will begin to roll in as from early 2021. Therefore, sustained massive demand for equity is not unconnected with investors’ anticipation of higher dividend payout and possible declaration of bonus shares . Portfolio re-alignment is going on in favour of equity investment. We should also appreciate that investment in equity can be used as a hedge against inflation,” Oni said.