Nairametrics| If you have investments in the Nigerian stock market but haven’t bothered to check your portfolio in a while, wait no more, now is the time to do so.
The Nigerian All Share Index capped the week ended May 12 with one of the best runs we have seen in over 2 years. The All share index closed the week with a sumptuous gain of about 7%, which in case you are wondering, is worth around N740 billion.
The last time the stock market posted this sort of weekly gains was in the week ending April 2nd 2015, when the index closed with a week to date gain of 18%, valued at a whopping N2 trillion.
While the 2015 gain was attributed to the frenzy and wave of optimism that followed the election of President Buhari, the latest bump was due to renewed optimism that foreign investors are on their way back into the market. Just like in 2015, the gain lasted for 10 straight days, as the index closed negatively on Friday.
Where the money was made
All the sub-indexes of the Nigerian Stock Exchange posted gains this week. A cursory look at the performance of the index reveals where investors have decided to stake their bets;
- The banking sub-index gained a whopping 11.18% this week. This was expected as banking stocks have long been viewed as being cheap having traded at a price earnings ratio of under 6x for nearly a year.
- The liquidity in banking stocks also made them an attractive proposition to investors. You could basically buy any banking stock you wanted. This is when liquidity in a stock can be a huge advantage. The more liquid a stock is, the more likely it is to meet any demand put before it. The downside is that banking stocks get sold off once the bears set in.
- We also observed strong gains in the consumer goods index. The index recorded a 13.36% gain, the best this week. A plausible reason for this gain is the attraction of the index to foreign investors. This is the index where you have Nestle, Nigeria Breweries, Dangote Sugar, Unilever etc.
- The Pension index also recorded a gain of 9.42% in another sign of how investors are buying. The index includes stocks that can only be purchased by Pension funds, who are only second the foreign investors in creating demand. This suggest pension funds have been buying equities in the past week along with other investors who are mirroring the index.
Stocks that gained the most
- A look at the top 10 gainers this week is a bit flattering as it includes some of the least capitalized stocks on the exchange.
- Apart from Nigeria Breweries and Ecobank, the rest are relatively smaller cap stocks
- Between the top 10 is a gain of between 16.3% and 32% in one week.
- Whilst this were massive gains by any standards, heavyweights such as GTB, Zenith, Forte Oil, Nestle also posted double-digit growth.
Will the rally continue?
- We expect some pull back early next week as investors start to take some profits
- This will likely be followed by another bull run, as those who missed out on the previous week’s rally position themselves to buy.
- The 2017 budget recently passed by the National Assembly is also likely to improve foreign investor confidence in the economy even as we expect some macroeconomic data announcements from the NBS next week.
- The inflation rate will be out next week and we could see a release of Nigeria’s first quarter GDP report
- All eyes will also be on the CBN investor window as foreign investors assess the performance of the window this week (ending May 12th)
Did you miss out on this rally, or gained from it? Share with us…