Equities investors in the Nigerian Stock Exchange (NSE) have accumulated capital gains of about N4 trillion over the past 11 months. Low valuations, improved macro economy and more coordinated Monetary Policy management, led to sustained considerable rally across the stock market.
Benchmark indices at the NSE showed average year-to-date gain of 41.19 per cent for the 11-month period ended November 30, 2017, equivalent to net capital gain of about N3.97 trillion, representing a two-month increase of 33.7 per cent on net capital gain of N2.97 trillion recorded at the end of third quarter (Q3).
With largely positive and steady Q3 corporate earnings and stronger macroeconomic data, quoted equities rode above recurring profit-taking transactions, to sustain month-on-month positive trend.
With a net capital gain of N3.97 trillion by November, investors have almost technically recovered what they had lost in the past three years, a major recovery that could reverberate across many other sectors, especially finance and investment institutions with large exposures to equities.
The stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion. Aggregate market value of all quoted equities on the NSE closed 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.
Aggregate market value of all quoted equities closed November 2017 at N13.215 trillion as against its opening value of N9.247 trillion for the year, representing net capital gain of N3.968 trillion. The All Share Index (ASI)-the main common price index that tracks share prices at the NSE, indicated 11-month return of 41.19 per cent, rising from the year’s opening index of 26,874.62 points to close this weekend at 37,944.60 points.
Investors in the banking sector were far ahead of other sectors with the NSE Banking Index indicating average year-to-date return of 71.60 per cent for the 11-month period. The NSE 30 Index, which tracks the 30 most capitalized companies, posted above average return of 43.51 per cent, underlining the fact that the recovery was partly driven by large-cap stocks. The NSE Consumer Goods Index ended the period with 28.87 per cent. The NSE Industrial Goods Index recorded the second highest sectoral gain of 33.08 per cent. The NSE Insurance Index posted a modest return of 10.97 per cent. However, the NSE Oil and Gas Index remained on the downtrend with a negative return of -7.01 per cent.
The recovery also impacted positively on the Nigerian Pension industry and ethical finance segment. The NSE Pension Index, which tracks stocks specially screened in line with pension investment guidelines, showed that pensioners might be in for wider dining tables with above-average return of 62.58 per cent. The NSE Lotus Islamic Index-which tracks stocks that comply with the Islamic law, recorded considerable return of 32.58 per cent, underlining the attractiveness of ethical investment in the midst of the rally. The NSE Lotus Islamic Index excludes interest-based banks, breweries, gambling and overleveraged companies among others.
The 11-month performance further confirmed quoted equities as the most attractive asset class for the period. With inflation rate at 15.9 per cent and the benchmark interest rate at 14 per cent, average inflation and interest-adjusted return remains in double digit at about 11.3 per cent.
The past two months had built on considerable gain made by the third quarter of the year. Aggregate market value of all quoted equities on the NSE had closed the third quarter at N12.217 trillion, representing net capital gain of N2.97 trillion or 32.1 per cent. The ASI had also crossed nine levels to close September at 35,439.98 points, representing an increase of 31.87 per cent.
Quarter-on-quarter analysis showed that the ASI has already surpassed its third quarter performance within the first two months of the fourth quarter. Between October and November, the ASI recorded average gain of 7.07 per cent compared with 7.01 per cent recorded in the third quarter. The performance so far in the fourth quarter was driven largely by the industrial goods and banking sectors.