The Nigerian bourse ended the week on a strong bullish run. It recorded gains for five straight days as the All-Share Index and Market Capitalization both appreciated by 1.41% to close the week at 25,041.89 and N13.063 trillion respective. Investors Gained N181.62billion on a week to week basis.
A total turnover of 1.065 billion shares worth N10.798 billion in 20,482 deals was traded this week by investors on the floor of the Exchange, in contrast to a total of 421.984 million shares valued at N5.337 billion that exchanged hands last week in 11,801 deals.
The Financial Services industry (measured by volume) led the activity chart with 677.301 million shares valued at N5.070 billion traded in 10,386 deals; thus contributing 63.59% and 46.95% to the total equity turnover volume and value respectively.
The Conglomerates Industry followed with 153.384 million shares worth N580.216 million in 894 deals. The third place was the Industrial Goods industry, with a turnover of 57.404 million shares worth N861.263 million in 1,671 deals.
Trading in the top three equities namely FBN Holdings Plc, UACN Plc, and Access Bank Plc.(measured by volume) accounted for 320.196 million shares worth N1.802 billion in 2,639 deals, contributing 30.06% and 16.69% to the total equity turnover volume and value respectively.
All other indices finished higher with the exception of the NSE Insurance Index which depreciated by 0.28% while the NSE ASeM closed flat.
Forty-one (41) equities appreciated in price during the week, higher than twenty-four (24) equities in the previous week. Eighteen (18) equities depreciated in price, lower than twenty-eight (28) equities in the previous week, while one hundred and four (104) equities remained unchanged, lower than one hundred and eleven (111) equities recorded in the previous week.
Top 10 gainers
- NEIMETH INTERNATIONAL PHARMACEUTICALS PLC up 21.33% to close at N1.82
- UACN PROPERTY DEVELOPMENT COMPANY PLC up 18.52% to close at N0.96
- FLOUR MILLS NIG. PLC. up 13.20% to close at N19.30
- SEPLAT PETROLEUM DEVELOPMENT COMPANY PLC up 12.83% to close at N350.00
- STANBIC IBTC HOLDINGS PLC up 10.00% to close at N33.00
- VALUEALLIANCE VALUE FUND up 9.98% to close at N113.50
- UNIVERSITY PRESS PLC. up 9.90% to close at N1.11
- AXAMANSARD INSURANCE PLC up 9.72% to close at N1.58
- FIDSON HEALTHCARE PLC up 8.57% to close at N3.42
- GUINNESS NIG PLC up 8.46% to close at N14.10
Top 10 Losers
- U A C N PLC. down 11.43% to close at N6.20
- TOTAL NIGERIA PLC. down 9.91% to close at N79.10
- ARDOVA PLC down 9.67% to close at N12.15
- CUSTODIAN INVESTMENT PLC down 9.09% to close at N5.00
- SUNU ASSURANCES NIGERIA PLC. down 9.09% to close at N0.20
- CONSOLIDATED HALLMARK INSURANCE PLC down 8.89% to close at N0.41
- MUTUAL BENEFITS ASSURANCE PLC. down 8.70% to close at N0.21
- UNILEVER NIGERIA PLC. down 8.57% to close at N11.20
- NEM INSURANCE PLC down 6.50% to close at N1.87
- LINKAGE ASSURANCE PLC down 5.00% to close at N0.38
Nigerian bourse against all odds finished high. This was triggered by buying pressures from institutional investors on blue-chip stocks. However, it was not all blue for the Nigerian bourse as market liquidity remained relatively low.
Nairametrics recommends cautious buying on growing concerns that the recent lockdown extension by President Buhari could delay a full economic recovery in Nigeria’s major economic hubs.
Race to recapitalization catapult Insurance stocks to best performing asset class in Nigeria
Why the insurance sector is currently the best performing stock market index in the country
Two weeks into the new year and the Nigerian Stock Market is already up 2.5% year to date. Stocks got to a fly last week following a slew of corporate deals that got the market excited.
During the week, Ardova, Transcorp, Champions Breweries, etc. were all in the news for reported acquisitions that are already paving the way for what could be a very busy 2020 for the stock market.
As corporate deals dominated the headlines, penny stocks topped the gainers’ charts with stocks like Japaul, Mutual Benefit, Royal Exchange, etc. posting double-digit gains. In fact, the top ten gainers last week all returned over 30%.
Among the top ten stocks, last week include about 7 Insurance stocks which all gained 30% and above. None of these companies have published any corporate actions lately and neither have they published any results. Yet their share prices have gained significantly in just 10 days of trading.
Insurance Stocks on the fly
The insurance sector is currently the best performing in the country with the NSE Insurance Index already posting a YTD return of 28.63% in just two weeks.
- Out of the 23 stocks listed in the index, 14 have posted at least 9% gains and above while the top ten are up by over 25%.
- Apart from being the best performing index on the exchange, it is arguably the best asset class to invest in Nigeria now.
- At 28,63%, the index is already beating the inflation rate which topped 15% in December.
- Last year, Sunu Assurance, another insurance stock was the best performing stock in the country posting a return of 400% YTD. AIICO ended with a 57% pop and Lasaco 40%.
Fundamentals not the driver
- While most insurance stocks appeared undervalued for much of the last two years, the harsh business environment faced by most insurance last year firms could not have pushed valuations this high.
- For example, insurance claims for the nation’s top insurers, Custodian, NEM, Axa Mansard, AIICO, WAPIC, and Consolidated Insurance rose from N56.3 billion in the first 9 months of 2019 compared to over N78 billion in the first 9 months of 2020.
- Insurance claims as a percentage of Net Premium in the same period hit 72% in 2020 compared to 61% in the same period in 2019.
- Insurance companies make money from a combination of underwriting profits (net premiums net of claims) and investment income.
Recapitalization is seen driving insurance stocks
Nairametrics understands the driver is likely the recent recapitalization efforts that have dominated the sector since 2019. Insurance regulator NAICOM had given Insurance firms until December 2020 to recapitalize or risk their licenses being revoked.
- The recapitalization rules require life insurance firms to meet a minimum paid-up capital of N8 billion, up from N2 billion previously.
- In the same vein, general insurance companies are required to raise their minimum paid-up capital to N10.0 billion from N3 billion previously.
- The regulatory capital for composite insurance was raised to N18 billion from N5 billion previously while reinsurance businesses are now required to have a minimum capital of N20 billion from a previous N10 billion.
However, the ravaging covid-19 pandemic forced the regulator to move the deadline to September 20202 but insurance firms were required to meet half the recapitalization requirement by the end of December 2020.
Court order Suspends Recapitalization
As insurance firms battled to raise capital, some took the regulator to court and obtained a court order suspending the recapitalization requirement.
- According to reports, Justice C. J. Aneke of the Federal High Court issued an order suspending the recapitalization on the back of an ex parte application applied for by the Incorporated Trustees of the Pragmatic Shareholders’ Association of Nigeria.
- In late 2020 the House of Representatives also passed a resolution demanding a suspension of the recapitalization efforts.
- Nairametrics understands despite all these suspensions and postponements, Insurance firms have till June to at least meet 50% of the recapitalization goals.
Upshots: As we continue to watch this space, Nairametrics expects a flurry of public offers, acquisitions, divestments to dominate the insurance sector in 2021. As charter around potential deals dominates the rumour mills of the market, insurance stocks will increase in demand. As usual, investors are advised to pick choose wisely.
Expansionary monetary policy expected to support Nigerian, global stocks
Sixty (60) equities appreciated at price during the week, higher than fifty (50) equities in the previous week.
Nigerian stocks ended the previous week cumulatively on a bullish note.
The Nigerian All-Share Index and Market Capitalization appreciated by 2.63% to close the week at 41,176.14 and N21.530 trillion respectively.
Sixty (60) equities appreciated at price during the week, higher than fifty (50) equities in the previous week. Nineteen (19) equities depreciated in price, lower than twenty- one (21) equities in the previous week, while eighty-two (82) equities remained unchanged, lower than ninety (90) recorded in the previous week.
The uptrend was driven by price appreciation in medium capitalized stocks among which are; Japaul Gold & Ventures, Mutual Benefits, AXAMansard, Royal Exchange, Champion Breweries, all printing weekly gains of more than 30% amid strengthening fears that reveal the COVID-19 crisis seems to be getting out of hand in Nigeria’s key international markets including Western Europe and the United States.
What they are saying
Michael Nwakalor, a Macroeconomist at CardinalStone Research, in a note seen by Nairametrics, gave key vital insights on what might be in play at Nigerian Stock Market in the coming days.
- “This week, we expect market players to continue to position for imminent dividend announcements with the release of full-year results in view. The continued dovish stance by the MPC in their first meeting of the year may also provide a tailwind for equities in the later sessions of the week.”
On the foreign scene, global stocks pared early losses on Monday as data confirmed the second world’s biggest economy China had impressive factory output report helping to offset recent disappointing news seen in America, showing a plunge in retail sales.
In addition, Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on macros that will be very key for stock traders and investors in the coming week.
- “We open the week to a noisy route-step beat of US national guards ring-fencing Capitol Hill. It’s hardly a festive backdrop to set the stage for a risk rebound into earnings season, especially with the latest unsavoury macro developments hanging like a dark cloud over markets.
- “Still, US stocks remain close to all-time high levels. The fiscal and monetary policy mix remains exceptionally supportive and dips at this stage are getting consumed. The Fed will continue to be highly accommodating even if they taper in QE in 2021 as they are unlikely to hike Fed Funds until 2022 or beyond.
- “The big questions remain as to what factors will take us higher over the short term in the face of the viral variants forcing politicians to lock down parts of the economy.”
With the COVID-19 pandemic under control in China, factories and export-oriented companies have been operating much better than most other countries, allowing China to meet global demand. The ongoing lockdown measures in play in Europe and the US are likely to continue to spur demand for Chinese goods in the coming months.
Dangote Cement, Lafarge drag Industrial Index up by 2.84% to close the second week in green
The NSE Industrial Index appreciated by 2.84% during the week to close the week 57.03 index points higher.
The Nigerian Stock Exchange Industrial Index appreciated by 2.84% during the week to close at 57.03 index points higher, as shares of Dangote Cement, Lafarge, WAPCO dragged the index to close the second week of 2021 higher, amid renewed buying interest by local investors.
Checks by Nairametrics revealed that the NSE Industrial index, as of close of trading activities on Friday, stood at 2,062.29 index points from 2,005.26 index points at the open of trade on Monday 11th January 2021.
What you should know
- The NSE Industrial Index was designed to provide an investable benchmark to capture the performance of the Industrial Sector. It comprises the most capitalized and liquid companies in the industrial sector and is based on the market capitalization methodology.
- The index monitors the performance of ten industrial companies on the Nigerian Stock Exchange which includes, Dangote, BUA and Chemical Allied Products.
- Consequently, the performance of the companies was relatively balanced as the index closed on a positive note with 5 gainers relative to 5 losers. MEYER (+10.00%) led the gainer’s chart for the week, while CUTIX (-8.75%) was the top loser.
MEYER up 10.00% to close at N0.55
PORTPAINT up 9.84% to close N2.68
WAPCO up 6.73% to close at N23.80
CAP up 3.25% to close at N20.65
DANGCEM up 2.31% to close at N230.20
CUTIX down 8.75% to close at N2.19
NOTORE down 4.00% to close at N60.00
BETAGLAS down 2.17% to close at N54.20
BERGER down 1.36% to close at N7.25
BUA CEMENT down 1.25% to close at N79.00