Nigerian stocks rose further Monday as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) climbed to a new high of 43,119.08 while market capitalisation hit N15.447 trillion. This follows sustained rally in the market since the beginning of 2018, which has seen the Nigerian exchange gaining the most among the 96 major exchanges tracked by Bloomberg.
As at the close of trading Monday, the market’s main equity index, which is the NSE ASI, had advanced by 12.7 per cent. This meant that the Nigerian market, which recovered from a three-year fall to gain 42.3 per cent last year, had appreciated further by 12.7 per cent in 10 trading days of 2018. Market capitalisation of equities had grown by N1.837 trillion since the beginning of the year.
The rally has mainly been driven by the banking, consumer, insurance, and industrial goods sectors of the market. Specifically, the NSE Banking Index that led the market last year with a growth of 73.3 per cent, has appreciated by 20 per cent this year, outperforming the NSE ASI by 7.3 per cent.
The NSE Industrial Goods Index followed with a growth of 16.9 per cent, while the NSE Insurance Index has appreciated by 11.4 per cent, NSE Oil/Gas Index has appreciated by 8.4 per cent, just as the NSE Consumer Goods Index has advanced by 7.2 per cent.
Market operators have attributed the Bull Run to investors’ reaction to rising oil prices, positive macroeconomic outlook and high expectations for impressive 2017 full year results.
Besides, Nigerian equities are seen as still having significant upside, hence investors are swooping on the stocks.
Bloomberg had reported that the bull run will probably be sustained as prices for oil, Nigeria’s main export continue to rise, while investors look to increase their holdings of what remains among the cheapest stocks in Africa, according to the asset management arm of South African lender FirstRand Limited.
“For investors wanting more exposure to consumers in Africa and Nigeria, in particular, the outlook is good,” said Paul Clark, a money manager in Johannesburg at Ashburton Investments, which owns Nigerian stocks, including Seplat Petroleum Development Co. “The banking sector is probably the most attractive at the moment, especially the tier-2 lenders.”
Despite the gains so far, Nigerian valuations are still considered the cheapest among the major African equity indexes.
Nigerian stocks trade at a forward price-to-earnings ratio of 10.2, while South Africa’s are at 14 and the MSCI Emerging Market Index is at 13.
“For long-term investors, Nigerian equities were a screaming bargain,” said Nick Ndiritu, co-manager of Allan Gray’s $389 million Africa equity fund, which doesn’t include South Africa. “Investor sentiment has turned more bullish on Nigeria and a re-rating of the Nigerian stock market is now underway.”
A look at the banking sector that is driving the rally showed most of the stocks have surged above 50 per cent so far this year. Sterling Bank Plc has gained 76.8 per cent, while FCMB Group has appreciated 71.6 per cent. Diamond Bank Plc has recorded a growth of 69 per cent, while Skye Bank Plc trading 68 per cent above its year’s opening price. Unity Bank Plc has appreciated by 54.7 per cent, while Wema Bank Plc has gained 51.9 per cent among others.
The banking sector had similarly led the market with some of the stocks rising above 150 per cent. Fidelity Bank Plc topped the gainers’ chart in 2017 with 192.9 per cent. Stanbic IBTC Holdings Plc followed with 176.7, while FBN Holding Plc went up by 162.7 per cent.