It is no secret that April was particularly good for equity markets all around the world. The three major American indexes recorded their best monthly gains since 1987, and the benchmark European index (Stoxx 600) posted its best monthly return since 2015.
Nigeria was not left out; the Nigerian stock market recorded a monthly performance not seen since August 2017 (best monthly performance in three years).
The composite NSE All Share Index for April gained 8.08 % to close at 23,021.01 points, from an opening level of 21,300.47 points in the beginning of April. Stock market capitalization for the period was up at N11.997 trillion on April 30, 2020, from an opening value of N11.101 trillion on April 1, 2020.
Bulls had a good run in Nigeria’s stock market, as N896 billion was added to investors’ coffers.
Despite this bullish charge, April still left some bitter tales. On the macro level, the United States’ jobless claims soared to historic levels, while oil price briefly turned negative for the first time in its history. In Nigeria, Covid-19 cases continued to rise; the NCDC (Nigeria Centre for Disease Control) announced 1,793 new cases last month.
(READ MORE: Bulls win Grand Slam in Nigeria’s stock market)
There’s a frayed phrase in equity markets: sell in May and go away. While this saying might be more applicable to the more developed markets, it has not really played out in Nigeria’s stock market.
“In the last ten years, May’s returns have been positive 60% of the time; only in 2018, did we record a negative performance that was significantly greater than 1,” as reported by Cardinalstone Research.
READ MORE: Capital flows to Nigeria down for the second consecutive quarter by 7.8% q/q
Victor Silas, an Investment Analyst, explained to Nairametrics why Nigeria’s stock market had a good run in April. He said:
“The stock market had a satisfactory performance against many odds last month. I will attribute this performance to two major factors.
“The first, limited forex supply, as FPIs scrambled for FX liquidity after exiting positions due to the economy outlook because of fall in oil price and revenues.
“As foreign portfolio investors could not find the dollars to exit, these funds definitely found their way, but to the market for tactical plays.
“Subsequently, system liquidity. As OMO (Open Market Operations) bills mature, locals, both retail and institutional investors, are faced with liquidity problems; so they are on the lookout for investment opportunities. Hence, the market dynamics presented an opportunity to buy stocks in the dip.”
Victor Silas also talked about foreign portfolio bias going forward in the Nigeria stock market.
“In my expectations, considering a possibility of increased FX supply to the market, I expect foreign portfolio investors to be on the sell side, with locals on the buy side.”
(READ MORE: Bulls on rampage, surge pushes market cap over N12 trillion)
Nigerian Stocks have posted gains already in the last seven days straight, as investors look on the brighter side of life. Despite, the gloom of Covid-19, there appears to be hope on the horizon with news of a possible antiviral drug. Nigeria has gotten a $3.4 billion loan from the IMF helping boost external reserves. Oil prices are also back up, perhaps signaling the start of another w-curved recovery.
Will the market sell in May? For now, it doesn’t appear so.
