Oil Price Rebound, Improves Investors’ Patronage
The rebalancing in the oil market, which has resulted in a 94 per cent rebound in crude prices, added to enhanced institutional investors’ patronage in the Nigerian bourse buoyed equities transactions last week, as the All-Share Index (ASI), and market capitalisation soared massively by 5.59 per cent to close the week at 25,204.75 and N13.136trillion.
Similarly, all other indices finished higher with the exception of NSE ASeM, which closed flat. Analysts argued that the bullish rally also followed investors positioning ahead of markdown dates of blue-chip stocks, with many companies yet to release their 2019 full year, and Q1 2020 financials expected to do so.
According to them, since the grace period due to the coronavirus pandemic expires on May 31, more numbers are likely to hit the market in this period, especially the 2019 audited accounts.
For instance, the Chief Research Officer, Investdata Consulting Limited, Ambrose Omoduon, affirmed that the seeming bull-run of crude oil prices at the international market has supported the positive sentiment driving the market.
He pointed out that the money flow index also revealed improved institutional investors activities, adding that the rising new cases of the coronavirus and its negative impact on the economy, remains a grave concern.
“The market’s high dividend yield continues to attract buying interests, while more audited and unaudited corporate earnings will hit the market, going forward, despite the likely continuation of selloffs.
“In our opinion, 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 trade cautiously and seek trading opportunities in only fundamentally justified stocks.”
United Capital Plc analyst, in its report, titled: “What is driving the rally in the equities market,” said: “The question on the mind of investors includes whether the uptrend is sustainable and what exactly is driving this recovery. In our opinion, the recovery in share prices is driven by rebalancing in the oil market, which has resulted in a 94 per cent rebound in oil prices from $18 per barrel to about $35 per barrel within a month.
“This is an increasing indication that governments around the world will reopen their economies regardless of the anxiety around COVID-19; cheap market valuation of high quality stocks; sustained dividend declaration by corporates, translating into attractive dividend yield amid poor rates on T-bills and sizable market liquidity.”
Also, analysts at Codros Capital Limited, said: “In our opinion, 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 trade cautiously and seek trading opportunities in only fundamentally justified stocks.”
A breakdown of trading activities last week showed that gains recorded by most blue-chip stocks, lifted investors’’ wealth by N36billion at the reopening of the market on Monday.
Specifically, the ASI rose by 70.42 points or 0.29 per cent to 23,941.75 points. Accordingly, investors gained N36billion in value as market capitalisation went up to N12.477trillion.
The upturn was impacted by gains recorded in medium and large capitalised stocks, amongst which are; Okomu Oil, MTN Nigeria Communications, Unilever Nigeria, Lafarge Africa and GlaxoSmithKline Consumer Nigeria.
