Renewed demand for shares by investors at the stock market continued yesterday, further lifting the total gains by N197 billion to hit N1.062 trillion since the beginning of trading this year.
The market capitalisation of the Nigerian Stock Exchange (NSE) had closed 2019 at N12.958 trillion.
However, the sustained bullish trading in six days this year has led to a gain of N1.026 trillion, making the market capitalisation to hit N13.984 trillion yesterday.
And the listing of BUA Cement Plc shares added N1.18 trillion to further raise the market capitalisation to N15.164 trillion.
However, the major drivers of the growth has been Dangote Cement Plc, MTN Nigeria Communications Plc and banking stocks, where investors are positioning for significant dividend payments.
Already, Guaranty Trust Bank and Zenith Bank Plc, two companies known for good payment, have scheduled board meetings to consider 2019 full-year results and recommend final dividends for the year.
A stockbroker, Mr. Ayo Oguntayo, said the bullish performance currently being witnessed was expected considering the decline recorded last year.
“Many investors are positioning for the growth expected in the market because of some positive monetary policies expected to favour the market this year and beyond. Given the low valuations in the market, investors are buying most of the stocks at discounts and this trend is expected to continue for a while,” Oguntayo said.
Some market operators had expressed high optimism that the market would be positive this year after the poor performance last year.
For instance, the Chief Executive Officer of Sofunix Investment and Communications Limited, Mr. Sola Oni, said the market operated under a tough economic climate in 2019 as evident in the incessant bearish trend until the policy of the Central Bank of Nigeria on Open Market Operations (OMO) crashed yields on fixed-income securities.
“Expectedly, investors took flight for safety and reverted to purchase of equities with multiplier effects on the rise in many performance indicators. The NSE remains an investment destination,” he said.
According to him, the outlook for the market in 2020 is attractive as the market would be driven by a mix of factors.
“Effects of negative real return on fixed income securities following the new policy on OMO will continue to enhance demand for equities and attract more investors into the market. We expect consolidation to be the hallmark of the insurance sector as the market shall witness a flurry of mergers and acquisitions as well as business combination in a bid by insurance companies to recapitalise in line with the new policy of the National Insurance Commission (NAICOM),” he said.
Oni added that many stocks are still trading below intrinsic values, hence, an attractive valuation will attract more investors.
“But we expect the government to intensify efforts on creating a conducive business environment through its policy on ease of doing business and building security,” he said.
According to Oni, regardless of the nature of the economy, in 2020, financial, health, technology and agriculture sectors have strong potential to provide good returns for investors.
“Financial sector is noted for liquidity. The sector is fast attracting millennial customers through innovative services that thrive on technology.
The health sector is recording advancement in medical equipment while the pharmaceutical sector is evolving on a daily basis. We, therefore, expect the health sector to provide investment opportunities in 2020.
The technology sector itself is ruling the entire business world. The relevance of Artificial Intelligence is already gaining momentum. Also, innovative investments such as blockchains and Cryptocurrency are highly dependent on technology.
Trading on the securities market is technology-driven. The sector holds the potential for good returns. The federal government is committed to reactivating agriculture and other forms of Small and Medium Scale Enterprises in Nigeria through its policy of Anchor Borrower Programme.
“The success of the programme will be measured on its impact on the GDP and its ability to increase export in order to generate foreign exchange for the country and increase external reserve,” he said.
Also speaking, the MD/CEO, Network Capital Limited, Mr. Oluropo Dada, said fundamentals of the quoted companies remained strong despite the harsh macroeconomic variables.
“By way of dividend, many companies, especially banks, will return over 10 per cent yield based on historical records. Again, we expect PFA to make occasional intervention as s result of lower yields from the other market.
“However, it appears local investors will be the major determinant of the outlook as higher yields from United States markets may keep foreign investors away for some time. By and large, 2020 appears more promising that the previous years because the valuations of the stock market instruments are becoming more attractive to all the various classes of investors,” he stated.