The Nigerian Stock Exchange, NSE, yesterday recorded its biggest daily gain since December 2018, as the value of listed stocks (market capitalisation) rose by N471 billion.

The bullish trend which began on December 24th, last year, pushed up the NSE market capitalisation to N13.8 trillion yesterday from N13.3 trillion on Tuesday, representing a 3.5 per cent increase.

This represents the biggest daily increase since December 24th, 2018 when the market capitalisation rose by 3.88 percent. Also, the All-Share Index (ASI), yesterday attained a one year daily high of 3.5 percent, the largest increase since May 22, 2019, closing at 31,145.15points.

Specifically, the Index closed yesterday at 28,562.48 points, development security dealers attributed to the interplay between the fixed income and equities market, saying that the lower yield environment in the fixed income market is pushing investors back to the local bourse in search of higher yield.

They stated that dividend yield is also becoming more attractive, combining to fuel the movement. The early-year rally at the nation’s premier securities exchange according to dealers is also driven by higher oil prices. Oil prices opened much higher after Iran’s strikes on US-Iraqi bases. But they are now below $70/barrel again ($68.60/barrel).

The dealers, however, said that the trend is not sustainable as local investors behind the buying interest do not have the capacity to sustain the rally.

Recall that the Central Bank of Nigeria (CBN), October 2019, barred local investors from participating in secondary market (Open Market Operation, OMO) treasury bills auction, which further aggravated the death of investment options for local investors.

This triggered excess demand in the fixed income space leading to a sharp decline in yields on fixed income instruments, especially the Nigerian Treasury Bills (NTBs).

For instance, at the last NTB auction, the CBN offered and sold N74.8 billion worth of NTBs, while investors demanded for N174.5 billion. As a result of this development, the yield on one-year NTB dropped to 5.2 percent from 15 percent in January, 2019.

The excess liquidity and low yields occasioned by the CBN OMO bank is believed to have shifted investors’ attention to the stock market, hence the seven days rally in the stock market.

Following the upsurge in the NSE yesterday, Year to Date, YTD return increased to 6.4 percent and market capitalisation which represents the equities value of listed on the Exchange rose by ₦470.9billion to ₦13.8trillion from N12.971 trillion at the beginning of the year.

The trend may be sustained as many companies listed on NSE prepare to release their full-year financials from next month. The results may increase the positive look of the market as more investors will move to buy value stocks with a history of dividend payments and capital appreciation.

According to analysts who spoke to Vanguard, this market sentiment will fuel renewed buy-side interest in the domestic bourse and will translate to positive performance well into future trading sessions at the exchange.

“Investors are willing to see if they can take one more risk as much as possible,” said Ayodeji Ebu, Managing Director/CEO, Afrinvest Securities, adding that, “I don’t think it is sustainable because the local investors do not have the capacity to take on risk.”

David Adonri, Managing Director/CEO, Highcap Securities and Investment, speaking, said: “There is a competition between the debt and equities market. Now that the yield is declining very fast, so, financial assets are migrating back to equities. Yields on equities are expected to, at least, surpass that of debt.

“After a while when the yield in-balance has been sufficiently corrected, the market will stabilise.”

Further analysis of the trading on the NSE yesterday showed that the top traded stocks by volume were UBA (156.0million units), Zenith Bank (86.1millon units) and Access Bank (82.4million units) while Zenith Bank (N1.9billion), UBA (N1.1billion) and MTN Nigeria (N1.3billion) were the top traded stocks by value.

Meanwhile, performance across all sectors was superb as all indices closed green. The Industrial Goods Index led gainers with a 6.2 percent gain, following substantial buy interest in Dangote Cement which garnered (9.3 percent) and WAPCO (5.7percent ).

The Banking Index up by (3.7 percent) and Insurance Index (2.7 percent) trailed due to gains in STANBIC IBTC which garnered (6.3 percent), FBNH (10.0 percent) and Zenith Bank (3.8 percent) as well as MANSARD Insurance (2.5 percent ) and CHIPLC (8.3 percent ). Similarly, price appreciation in MTN Nigeria (1.8 percent), Flour Mills (8.8 percent) and NASCON (+3.8 percent) pushed the AFR-ICT and Consumer Goods Indices 1.0 percent and 0.3 per cent higher respectively.

Lastly, the Oil & Gas index edged 0.2 per cent higher due to gains in CONOIL (9.7 percent) and OANDO (1.3 percent). (Vanguard)

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