As the effects of CBN’s recent policy in the fixed income space continue to reverberate in the capital market, investors flocked to the equities market last week in search of yield. The move, consequently, drove the domestic bourse to its largest weekly gain in the last three months.
Despite the one-day holiday declared to mark the Eidel Maulud, the All-Share Index (ASI) of the Nigerian Stock Exchange (NSE) and market capitalisation appreciated by 2.04 percent respectively, to close the week at 26,851.68 points and N13.071 trillion as well.
Similarly, all other indices finished higher with the exception of NSE Insurance and NSE Oil/Gas indices, which declined by 0.56 per cent and 1.76 percent respectively, while the NSE ASeM index closed flat. The apex bank had recently directed banks and other financial institutions to stop the sale of Open Market Operations bills to individuals and companies.
Already, the yields on treasury bills have crashed further to its lowest in three years, closing in the single digit region at the end of the Primary Market Auction (PMA) last week’s Wednesday.In view of the development, packs of gains in high dividend-yielding stocks, especially in the banking sector ensured the market posted its best last week.
For instance, at the end of transactions last Wednesday, NSE’s index recorded the highest gain in six months, as investors’ wealth appreciated by N245 billion.This development also caused the market capitalisation to cross N13 trillion mark, just as major sectors of the market closed positive; especially the banking sector.
Specifically, ASI rose by 504 points or 1.91 per cent to 26,843.11 points. Accordingly, investors gained N245 billion in value, as market capitalisation went up to N13.067 trillion.The upturn was impacted by gains recorded in medium and large capitalised stocks, among which were Guinness Nigeria, Guaranty Trust Bank, Zenith Bank, Dangote Sugar Refinery and Access Bank.
Reacting on the development, analysts at Codros Capital Limited said: “In our view, the performance this week is a reaction to a limited outlet for investments, given recent policy directives limiting domestic participation in the market.
We expect that the market might continue to benefit over the short-term especially in the face of lower yields in the fixed income market.”
The Chief Research Officer of Investdata Consulting, Ambrose Omodion, said the recent decision by CBN to shut out local fund managers, limiting their access to the Treasury Bills investment window, and the sharp drop in money market rates have triggered the circular flow of funds in search of higher returns.
“This is a bullish sign that indicates efforts by smart money, including foreign investors, pension fund managers, insurance companies, stockbrokers and others, to move stock,” he said.Further breakdown of last week’s transactions showed that a turnover of 2.084 billion shares worth N33.867 billion were recorded in 21,849 deals by investors on the floor of the exchange in contrast to a total of 2.063 billion shares valued at N18.431 billion that was exchanged in 16,778 deals during the preceding week.
The financial services industry (measured by volume) led the activity chart with 1.705 billion shares valued at N21.555 billion traded in 15,395 deals; thus contributing 81.84 per cent to the total equity turnover volume.
The consumer goods industry followed with 188.870 million shares worth N7.445 billion in 1,989 deals. The conglomerates’ industry ranked third with a turnover of 82.675 million shares worth N128.662 million in 691 deals.
Trading in the top three equities namely, Zenith Bank Plc, Access Bank Plc and United Bank for Africa Plc. (measured by volume) accounted for 1.210 billion shares worth N17.048 billion in 7,031 deals, contributing 58.09 per cent to the total equity turnover volume and value respectively.
A total of 1,523 units valued at N262,358.33 was traded this week in eight deals, compared with a total of 5,624 units valued at N177, 580.70 transacted last week in five deals. Also, 39 equities appreciated in price during the week, higher than 30 equities in the previous week and 11 equities depreciated in price, lower than 28 equities in the previous week, while 116 equities remained unchanged.