27 July 2017

Nigeria: Equities Market Nears Three-Year High, Gains N1.5 Trillian in 15 Days

The Nigerian equities market Wednesday moved closer to a three-year high after the Nigerian Stock Exchange (NSE) rose 3.4 per cent to hit 36,740.77, while market capitalisation closed higher at N12.662 trillion. This is a 32-month high and if the bullish trend continues for the week, the index would hit 37,000 point level, which was last attained in November 2014.

The growth followed 15 days of consecutive rally prompted by stability in foreign exchange (forex) market that has led to increase in the level of foreign portfolio investments (FPIs), release of improved half year corporate results and relative increase in number of domestic investors.

Year to date, the market has recorded a growth of 36.7 per cent. The market has remained uptick since July 6, leading to a gain of N1.529 trillion in capitalisation, growing from N11.133 trillion on July 6 to N12.662 trillion yesterday.

The market, which underperformed its peers for three years, shrugged off the losses last April following the introduction of new foreign exchange window by the Central Bank of Nigeria (CBN). The new forex window stabilised the rate of the naira, a development that encouraged more FPIs to return to the stock market. Besides, the relatively stable exchange rate environment was expected to impact positively on the performance of companies for the second quarter of the year. Hence, more investors decided to take position ahead of the announcement of the corporate results for the quarter that have started to trickle in showing increases in half-year profits.

Although the Tier-1 banks are yet to release their results, anticipation that the results would follow the same positive pattern in first quarter has triggered demand for the banking stocks, a situation that has shot the NSE Banking Index by 57.8 per cent.

Meanwhile, the level of FPIs between January and June 2017 stood at N430billion, showing an increase of 59.8 per cent from N269.22 billion invested in the corresponding period of 2016, according to data released by the NSE.

Similarly, domestic investors increased their level of investments to N505.03 billion in 2017, up by 42.19 per cent compared to N355.19 billion in 2016.

In all, total transactions at the nation's bourse in H1 of 2017, increased by 47.7 per cent to N935 billion, from N624 billion in 2016. However, domestic investors outperformed foreign investors by 7.82 per cent in the month of May. While total domestic transactions increased by 7.53 per cent from N110.42 billion recorded in May 2017to N118.74billion in June2017, FPIs also increased by 6.66 per cent from N95.19 billion to N101.53billion within the same period.

But a further analysis of the domestic participation showed that the institutional composition of the domestic market decreased by 17.09pe cent from N67.95 billion recorded in May to N56.34billion in June2017.

However, the retail composition increased by 46.92 per cent from N42.47 billion to N62.40billion within the same period.

According to NSE, this indicates a higher participation by retail investors over their institutional counterparts for the first time.

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