Money Market Crash Triggers Largest Daily Gain In Five Years

Declining interest rates in the fixed income market triggered massive rally on the equities sector of the Nigerian Stock Exchange (NSE) last week, as the market All-Share Index (ASI), and market capitalisation both appreciated by 12.97 per cent, its eighth-consecutive weekly gain to close at 35,037.46 and N18.308 trillion, respectively.

Similarly, all other indices finished higher, while the NSE ASeM Index closed flat.

Also, the market posted its largest daily gain in more than five years last week Thursday, spurred by the activation of circuit breaker in the market for the first time since its introduction in 2016, as the ASI soared beyond the set threshold of five per cent.

Operators linked the unprecedented rally to the declining interest rates in the fixed income market, which is currently ridiculously low, while local institutional investors see the equities market presently as a destination of investment.

Recall that over the last 10 years, it has been remarkably easy to beat inflation by buying FGN Treasury Bills, which averaged 2.57% above inflation between 2010 and 2019.

However, with the crash in interest rates in the first half of the year, this era ended abruptly.

Analysts at Codros capital said: “In the short to medium term, we still see scope for expansion in valuation multiples as sub 1% yields on NTBs will continue to engender rejigging of portfolios towards equities.

“In the week ahead, we expect investors’ attention to be centred on Q3 earnings yet to be published from the big banks (FUGAZ).

“Considering the robust gains recorded across most counters over the past two months, we expect some profit-taking activities, albeit a short-lived one.

“We reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.”

Afrinvest Research said: “While we anticipate profit-taking in the coming week, we expect the equities market to extend the bullish streak with mild gains.”

A review of the market performance last week showed that investors’ continued interest in some high capital (high cap) stocks, especially Dangote Cement and MTN Nigeria Communications (MTNN), resulted to a further rise in market capitalisation by N641 billion on Monday.

The ASI increased by 1,226.88 absolute points or 3.96 per cent to close at 32,243.05 points.

The upturn was impacted by gains recorded in medium and large value stocks including Dangote Cement, MTN Nigeria Communications (MTNN), Lafarge Africa, BUA Cement, and Guaranty Trust Bank.

The NSE market capitalisation hit N17 trillion marks on Tuesday, even as sustained bargain-hunting for dividend paying stocks continues to stimulate activities in the nation’s bourse.

At the close of trading Tuesday, the ASI gained 404.05 absolute points, a 1.25 per cent increase to close at 32,647.10 points, while market capitalisation gained N211 billion to close at N17.059 trillion.

The upturn was impacted by gains recorded in large and medium value stocks, including MTN Nigeria Communications (MTNN), Stanbic IBTC Holdings, NASCON Allied Industries, Dangote Sugar Refinery, and Ardova Plc.

The rally extended to Thursday’s trading session, as market capitalisation hit N18.468 trillion marks on the back of gains in high cap stocks like Dangote Cement, BUA Cement and Airtel Africa Plc.

The ASI increased by 2,074.10 absolute points, representing a growth of 6.23 per cent to close at 35,342.46 points. Similarly, the market capitalisation gained N1.084 trillion to close at N18.468 trillion.

The upturn was impacted by gains recorded in medium and large capitalised stocks including Nestle Nigeria, Airtel Africa, Dangote Cement, Presco, and Nigerian Breweries.

Meanwhile, a turnover of 4.509 billion shares worth N58.733 billion was recorded in 47,140 deals by investors on the floor of the Exchange, in contrast to a total of 2.067 billion units valued at N22.636 billion that exchanged hands in 25,187 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 3.073 billion shares valued at N35.408 billion traded in 25,894 deals; thus contributing 68.15 per cent to the total equity turnover. The conglomerates followed with 437.822 million shares worth N771.280 million in 1,864 deals.

The third place was the consumer goods industry, with a turnover of 373.613 million shares worth N7.816 billion in 7,471 deals.

Trading in top three equities, namely Zenith Bank Plc, FBN Holding Plc, and Transcorp Hotels Plc (measured by volume) accounted for 1.426 billion shares worth N18.083 billion in 9,537 deals, contributing 31.63 per cent to the total volume.

A total of 986,941 units of ETPs valued at N4.685 billion were traded in 62 deals compared with a total of 238,441 units valued at N2.054 billion that was transacted during the preceding week in eight deals.

Also, 13,332 units of bonds valued at N17.142 million were traded last week in 19 deals compared with a total of 6,011 units worth N7.543 million transacted last week in 14 deals.

– The Guardian