The price appreciation of some banking stocks and some blue-chip stocks that traded on the floor of the Nigerian Stock Exchange (NSE) last week influenced the return of the bulls against the bears that had ruled the bourse since October 9, 2019, when the market capitalization fell from the N13 trillion mark to N12.94 trillion.
Also, the All-Share Index dropped from 26,809.92 to 26,598.94. The downturn then was impacted by losses recorded in medium and large capitalised stocks like Nestle Nigeria, Dangote Cement, Guinness Nigeria, Nigerian Breweries and Presco, among others.
But the trend witnessed last week depicted that the bulls are on a rebound, as the major indicators mentioned above sustained their upward movement for about three days consecutively.
On Thursday, when the jinx of N13 trillion mark was broken, the All-share index grew by 1.91% to close at 26,843.11 basis points, the highest recorded yet in the month of November. Also, the total market capitalization increased by 1.83% from N12.8 trillion recorded yesterday to close at N13.1 trillion, hitting the N13 trillion market.
The stock market traded 624.8 million shares valued at N10.02 billion across 6,426 deals from which banks scooped the largest trades of the day.
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At the end of Friday’s trading, the top trades on the bourse were totally dominated by banks, as they traded 336.8 million shares valued at N3.69 billion, which account for 66% of the total shares traded on the stock market.
The All-share index grew by 0.03% to close at 26,851.68 basis points, as the market capitalization moved up by N100 billion when it closed at N13.1 trillion.
Week on Week
For instance, the ASI and market capitalisation both appreciated by 2.04% to close last week at 26,851.68 and N13.071 trillion respectively. Similarly, all other indices finished higher except for NSE Insurance and NSE Oil/Gas indices, which declined by 0.56% and 1.76% respectively, while the NSE ASeM index closed flat.
Drivers of the BUMP
The Financial Services industry (measured by volume) led the activity chart with 1.705 billion shares valued at N21.555 billion, as it traded in 15,395 deals, thus contributing 81.84% and 63.65% to the total equity turnover volume and value respectively.
The Consumer Goods Industry followed with 188.870 million shares worth N7.445 billion in 1,989 deals. The third place was Conglomerate industry with a turnover of 82.675 million shares worth N128.662 million in 691 deals.
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% and 50.34% to the total equity turnover volume and value respectively.
The CBN‘s OMO ban effect
The development could be attributed to the recent Central Bank of Nigeria’s restriction of individuals and small firms from trading in the Open Market Operations (OMO), low treasury bills yield and limited investment outlets available to investors.
These, experts believe, led to the influx of the new growth witnessed by the major market indicators. Comercio Partners Limited explained that though its concerns remain the seeming unclear direction of the CBN with regards to monetary policy, the recent CBN’s move pushed the indicators further.
It stated, “Many investors with huge cash but limited investment outlets available will have invested the funds in the equity market. Some people collect huge severance packages, have huge funds they must have taken to the bourse. ”
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The Treasury bill’s interest rate crash effect
A council member, NSE, Adebayo Ajayi, agreed with Comercio Partners, as he explained that the CBN directive would have a positive impact on the equities market as corporate organisations like pension managers would have to divert more funds into the equity market.
He also attributed the development to the crash of the interest rates in the treasury bills market, which slid into single digit region at the end of the Primary Market Auction last Wednesday.
He said, “The crash of the interest rates of treasury bills made investors’ search for alternative investments intensify. The aggregation of these factors pushed investors to stocks, which recorded highest gain in five weeks.”