Optimism trails Nigerian stock market as index records 23-month high

GAINS on the Nigerian equities market extended to the third week in a row, as the All Share Index appreciated by 6.07 per cent, projecting the nation’s stocks to a 23rd month high at 33,276.68 basis points, just as the market capitalisation hits N11 trillion thresholds to close the market at N11.5 trillion for the week.

Analysts and market operators shared fresh sentiments, looking at parameters and the direction of the economy, with the belief that the bull trend would be sustained on the prices of stocks.

According to the Managing Director and the Chief Executive Officer of Cowry Asset Management Limited, Johnson Chukwu, the recent gains recorded in the Nigerian stocks market would be sustained provided the country maintained the parameters as the stock market is the barometer to measure the economy of the country. He however believed there would be inter-missionary falls in the value of some stocks within the coming weeks but largely the market would sustain its bullish ride.

Analysts at FSDH believed that with the strong growth in the unaudited results that quoted companies released for the period January-March 2017 and the improvement in the macroeconomic environment, “the equity market is ready for a recovery in 2017.”

Explaining the recent rally trigger, analysts at Cordros believed that investors were responding to the favourable economic conditions, aside the introduction of the new foreign exchange window for investors and exporters (I&E) by the Central Bank of Nigeria (CBN). They believe that the sustainability of Investors & Exporters window to bring about availability of forex, proper management of policies to stimulate economic growth and favorable developments from these economic indicators will determine the stock market performance in this year and beyond.

Mohammed Jamiu of APT Securities also noted that the bullish trend of the nation’s stock market would be sustained noting that the economy is on the part of recovery.

He explained that based on the announcement of Morgan Stanley International Capital (MSIC), couple of weeks ago, to increase the weight of the Nigerian stock on their index.

“This means that if MSIC, a globally recognised investing banking firm increased Nigerian weight from 6.5 per cent to seven per cent, all the fund managers that are ready to mimic the index of Morgan Stanley also need to increase Nigerian stock from 6.5 to seven per cent. From that they have to buy more Nigerian stocks, such as Access Bank, Zenith Bank, GT Bank, Nigerian Breweries, among others. This has really imputed in the lull recorded in the market and I before believe it will be sustainable,” he said.

Looking into the last week’s gain that was well diversified across the sectors, the oil & gas stocks, rallied the most, perhaps on the news that the force majeure on the Forcados oil export terminal has been lifted, Cordros analysts believed .

“Banking stocks on the other hand, outperformed on report by Fitch Ratings acknowledging that liquidity pressures have eased for now, for its rated banks. Interestingly, both the local and foreign institutional investors are active drivers of the recent rally, and we understand the FPIs, encouraged by the improved ease of access to the dollars, are keen on their usually preferred consumer goods names, with a few banks, cement, and oil gas companies also on the card.

“Fundamentally, we note that only a few stocks have much upside from current price level, suggesting that a correction is imminent. That said, with the ongoing rally’s major life battery (developments in the FX market) remaining charged, we think equities will have strong wings to fly,” analysts forecast.