Industrial Stocks fade off gains from GTBank, First Bank

Investors in the Nigerian Stock market are surely having good return amid prevailing macro disrupting global financial market

What we know: Data retrieved from Bloomberg terminal revealed that the Nigerian Stock Index ranked third globally with respect to stock index performances. Consequently, the YTD performance improved to stand at 13.43%.

Just in the month of October alone, investors made a gain of about N1.934 trillion as the Nigerian bourse recorded its best monthly gain since 2018.

Emmanuel Orji, an Emerging market/Fixed income trader in a phone chat to Nairametrics, gave detailed insights into why it seems the Nigerian Stock Market is receiving a significant amount of cash flows in relation to low yields prevailing in the Nigerian debt market;

“It’s no surprise seeing the Nigerian equities market among the top three best performing index year to date after the outlier performance we had in October.

“The NSEASI was up 13.79% MTD in October, its biggest monthly gain since January 2018, which was largely driven by the robust system liquidity coupled with low yields at the fixed income space.

“Aside from the massive liquidity inflow in October (c.NGN1.7 trillion from OMO maturity repayment and coupon payment), the reduced supply at the October Bond auction coupled with the closing rate of 0.98% (1-yr paper) at the NTB auction further strengthen the bullish momentum,” Orji said.

Abiodun Keripe, Managing Director, Afrinvest Research in an exclusive interview with Nairametrics also spoke on key macros boosting the sub-Saharan Stock Exchange.

Keripe said, “Nigeria now ranks as the third best-performing stock market in the world out of a basket of 93 indices tracked by Bloomberg. This performance is majorly driven by local investors given the low yield environment and the continued, albeit slow-paced, and uneven rebound in economic activities which has bolstered the third-quarter earnings of major Corporates on the NSE.

“This performance is remarkable in the context of rising concerns over a second wave COVID-19 and prospects of a weaker external position for the Nigerian economy.

“It is interesting to see that stock prices have recovered to the pre-COVID-19 levels within a short duration while external conditions remain fragile.

“The CBN is yet out of the FX conundrum and lower-for-long oil prices remain a key concern.

“We expect strong Naira liquidity to keep fueling equities, even as an additional 1% allocation from the PFAs can lift stocks higher. However, we note that the market may be heating up ahead of a strong rebound in the general economy.”

The bottom line: The low yield environment and other market conditions prevailing in the Nigerian economy had triggered significant buying interest in Nigerian Stocks at record levels despite the seeming disconnection with strengthened geopolitical uncertainty and the resurging COVID-19 virus.