Stocks gains signal renewed market confidence

… GTBank, Zenith, Access Bank soar to new heights

By OKEY ONYENWEAKU

Perhaps many investors are still harbouring subtle fears whether it is the right time to return to the capital market or not. However, many others are jumping into the arena with confidence to reap from the gradual gains that seem to be trickling in.  Yet those who are addicted to investing in the market are already smiling to the banks given the new lease of yields abounding within the market horizon.

Hurray! The market has left the red zone to the green belt. More equities especially, the banking stocks are now drifting more to the North than otherwise. But the million Naira question is how sustainable is the market recovery?

Experts believe that nobody can predict the direction of the market with accuracy. However, anxious observers have seen the equities market on a recovery trajectory.  For instance, the major bench mark, the All-share Index which has remained in the negative, has turned bullish.

Keen observers of the capital market noticed the All-share index has gained about five per cent this year as the market closed May 19, 2017 over the weekend. There are convincing indications of renewed surge in investor confidence as more investors seem to be crawling back and repositioning to take advantage of the expected better outlook.

Market observers have noticed the Nigerian Stock Exchange (NSE) All-Share Index recorded a leap by 11.92 per cent in the last three weeks, from 25,189.27 to close at 28,192.46 on Friday April 13, 2017 while market capitalisation gained N1.03 trillion or 11.81 per cent, from N8.716 trillion to N9.741 trillion.

Further details disclosed that in the week ended April 28, 2017, the index rose by 2.26 per cent to close at 25,758.51, while market capitalisation closed at N8.913 trillion. Investors exchanged 1.33 billion shares valued at N9.671 billion in 16,300 deals.

The market surge has reflected strongly in the stocks of GTBank, Zenith Bank, Access Bank and others which stock prices are on upswing as a result. For instance, GTBank stock has surged by 31. 25 percent from N24 per share on January 3, 2017 to N31. 50 as at May 19, 2017. Access Bank’s stock also leapt by 26 per cent from N5.81 early in the year to close at N7.35 per share as at May 19, 2017. Similarly, the stocks of Zenith Bank surged 38.12 per cent, Nestle Nigeria Plc added 3. 08 per cent, Flourmills of Nigeria enjoyed a lift by 5.5 per cent to close at N19.00 per share. While Cadbury crawled forward by 8.89 per cent, Stanbic IBTC jumped 65.71 per cent to close at N26.00 as at May 19, 2017. A critical observation of the market revealed that some other stocks added value and helped to nudge the market higher.

Analysts have fingered reduced apprehension in the macroeconomic environment as partially responsible for the renewed vigour in the capital market. Impressive full year 2016 and 2017 first quarter (Q1) results of highly capitalised companies, analysts believe also combined to nudge the market northward. It is also obvious that increased confidence and liquidity in the forex market is having a positive effect in the market, market watchers have said.

Mr. Emeka Madubuike, President Association of Stock broken Houses of Nigeria, ASHON, reckons the economy and the capital market have a relationship given that booming and bearish economy exercise different impacts on the market.

Madubuike who observed the macro-economic environment is looking up, says it  is also eliciting corresponding response from the capital market.

According to him, the easing forex challenges, easing interest rates and impressive results from some blue-chip companies are also impacting positively on the prices of stocks. The calm in the Niger Delta which has stabilized our volume of oil production, the budget and increasing revenues of the nation have boosted confidence and investors seem to be more liquid.

Chairman Progressive Shareholders Association of Nigeria, PSAN, Boniface Okezie, believes that some companies have paid fair dividends which investors deployed to take further position in good stocks.

Okezie explained that the market has been down for too longer preparing for a lift with any little impressive positive information.

However, he cautioned that the economy needed to continue to grow stronger to achieve some stability in the market.

The World Bank has acknowledged recovery leaps in some African countries. These countries include Nigeria, South Africa, and Angola, the continent’s largest economies, are seeing a rebound from a slowdown which they have suffered in the last decades.

Whereas it noted that the recovery has been slow because of the difficulty in adjusting to low commodity prices and policy uncertainty, the Bank gave a 2.6 per cent growth for the region in 2017

“However, the recovery remains weak, with growth expected to rise only slightly above population growth, a pace that hampers efforts to boost employment and reduce poverty”, World Bank was quoted to have said.

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, had three weeks ago assured Nigerians that the country would get out of economic recession in the second quarter of 2017, explaining that there are emerging positive economic indicators within the horizon.

Before now the market had been volatile due the recession which started in the second quarter of 2016. The price of Crude dipped to about $30 per barrel and further shrunk the nation’s revenues, Inflation, though, slowing down had hit the roof top to about 19 per cent; other stifling policies had made it tough for even the private sector to survive.

These had caused many scared investors to run for cover. However, with inflation which has eased to 17.24, more supply of the scarce dollar, the economic recovery growth plan in motion, the rising price of crude which stood at $52 pb on Friday, have signalled better days ahead for the Nigerian economy.

This notwithstanding, there is huge uncertainty hanging around the health condition of President Buhari. Investors are crawling back, but they are cautious. However, the acting President, Yemi Osinbajo has exuded confidence, capability and ability to lead. Interestingly, the Western world has expressed confidence in Osinbajo to continue to navigate the Nigerian ship even when President Buhari is away for medicals.

“Additionally, recent improvements in global oil prices above the $45/b mark, improvement in domestic production currently above 2.0mbpd, fiscal responsiveness – including the release of the EGRP (Economic Growth and Recovery Plan), the successful issuance of US$1.5 billion Eurobond, passage of the 2017 budget, and improvement in the manufacturing PMI, suggest a possible rebound in economic activities from Q2 2017,” Analysts at Afrinvest were quoted to have said.