NSE defies GDP contraction, as earnings scorecards push index by 0.35%

Transactions at the Nigerian Stock Exchange (NSE) defied the impact of the recently-published 2020 second quarter (Q2) report of 6.1 per cent gross domestic product (GDP) contraction to close the week on a positive note, as the 2019 full-year corporate scorecards and ongoing half-year earnings reporting season with dividend pay-out continue to support the bull run.

Consequently, the NSE All-share index (ASI) and market capitalisation appreciated by 0.35 per cent to close the week at 25,309.37, and N13.203 trillion respectively.

All other indices finished higher with the exception of the NSE Premium, NSE Banking, NSE AFR Div Yield, and NSE MERI Value Indices, which depreciated by 0.45 per cent, 0.23 per cent, 0.77 per cent, and 0.9 per cent, while the NSE ASeM Closed flat.

Despite the positive note, analysts at the weekend, urged investors to trade cautiously and patronise dividend-paying stocks amid high inflation, negative Q2 GDP, and unstable economic outlook for 2020.

Specifically, analysts at Codros Capital said: “Nigerian stocks inched higher for the sixth successive week, following bargain-buying across large-cap stocks.

“Our view continues to favour cautious trading as risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions.

“Thus, we continue to advise investors to seek trading opportunities in only fundamentally justified stocks.”

Similarly, Investdata Consulting Limited said: “We expect the current trend to continue on profit-taking and portfolio adjustment ahead of the interim dividends from Stanbic IBTC, GTB, Zenith Bank, Access Bank, and UBA.

“The capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation, negative Q2 GDP of 6.1 per cent and unstable economic outlook for 2020.

“This is just as the government and its economic managers are going front and back with mismatched policies and action.

“The current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, but investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year.”

A review of the market performance last week showed that trading on the NSE reopened upbeat on Monday, following price gains recorded by most blue-chip companies, as market capitalisation appreciated by N4 billion.

Precisely, at the close of transactions Monday, the All-Share Index (ASI) increased by 7.25 absolute points, representing a 0.03 per cent growth to close at 25,229.12 points while the overall market capitalisation size gained N4 billion to close at N13.162 trillion.

The uptrend was impacted by gains recorded in large and medium capitalised stocks, which included Unilever Nigeria, Guinness Nigeria, PZ Cussons Nigeria, International Breweries, and University Press.

GTI Securities Limited urged investors to continue to patronize dividend-paying stocks amid market volatility.

“This is just as they continue to await the publications of audited tier-one banks financial results for first half (H1) 2020.”

Transactions on the equities sector of the Nigerian Stock Exchange (NSE), sustained a rising profile on Tuesday, as more blue-chip stocks appreciated in price, resulting in a further rise in the All Share Index (ASI) by 0.25 per cent.

The ASI increased by 62.61 absolute points, or 0.25 per cent to close at 25,291.73 points. Similarly, investors gained N32billion as market capitalisation rose to N13.194trillion.

The upturn was impacted by gains recorded in medium and large capitalised stocks, including BUA Cement, Julius Berger, Flour Mills of Nigeria, Lafarge Africa, and NEM Insurance.

Analysts believed that the earnings reporting season has continued to support the market’s bulls’ run, but noted that it is gradually coming to end with the expectation of half-year scorecards from the first-tier banks any moment from now.

The equities market maintained a positive streak at the end of Wednesday’s transactions, as more high capital stocks recorded price appreciation, causing investors wealth to grow further by N20 billion.

Specifically, at the close of transactions Wednesday, the ASI) increased by 38.37 absolute points, a growth of 0.15 per cent to close at 25,330.10 points. Similarly, the market capitalisation rose by N20 billion to close at N13.214 trillion.

The uptrend was impacted by gains recorded in large and medium value stocks, including Stanbic IBTC Holdings, Northern Nigeria Flour Mills (NNFM), UAC of Nigeria (UACN), Vitafoam Nigeria, and Guinness Nigeria.

After seven consecutive sessions of capital appreciation, the bears upstaged the bulls at the end of Thursday’s transactions on the NSE, causing the ASI to depreciate by 0.10 per cent.

Precisely, the ASI dropped by 25.85 absolute points or 0.10 per cent to close at 25,304.25 points. Similarly, the overall market capitalisation shed N13 billion to close at N13.201 trillion.

The downturn was impacted by losses recorded in large and medium capital stocks, including Dangote Cement, Fidson Healthcare, Lafarge Africa, Access Bank, and Zenith Bank.

Analysts at Afrinvest Limited said: “Following six days consecutive bullish streak, the profit-taking seen today was expected.”

Further review of last week’s trading showed that a turnover of 1.072 billion shares worth N7.384 billion was recorded in 16,684 deals by investors on the floor of the Exchange.

This amount traded was however lower than a total of 950.414 million units valued at N10.123 billion that was exchanged in 16,647 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 586.761 million shares valued at N4.022 billion traded in 8,483 deals; thus contributing 54.76 per cent to the total equity turnover volume and value, respectively.

The conglomerate’s industry followed with 307.744 million shares worth N799.159 million in 1,010 deals.

The third place was the consumer goods industry, with a turnover of 50.170 million shares worth N968.272 million in 3,018 deals.

Trading in the top three equities namely Transnational Corporation of Nigeria Plc, UACN Plc and United Bank for Africa Plc. (measured by volume) accounted for 396.337 million shares worth N1.373 billion in 1,845 deals, contributing 36.99 per cent to the total equity turnover.

Also, 29 equities appreciated in price during the week; lower than 31 in the previous week. About 36 equities depreciated in price, higher than 27 in the previous week, while 98 equities remained unchanged, lower than 105 equities recorded in the previous week.