The Nigerian stock market enjoyed a sensational year in 2020 as the Nigerian stocks rallied despite a difficult year for the economy.
While investors await to see the audited financials of publicly listed companies, the index of some industries have been flying at top speed as investors may already be taking positions today in anticipation of a 2021 profit recovery while ignoring their 2020 financial performance.
Most economists anticipate that the oil sector and insurance sector may have faced a very difficult year in 2020. This is because oil prices collapsed significantly in 2020 sending major oil exploration companies like Seplat into loss positions as at Q3 2020.
For the insurance sectors, job losses related claims are expected to rise and claims owing to #ENDSARS protests are expected to significantly increase insurance claims for the sector.
The year was even more difficult for them considering that customers may not have been paying premiums regularly in 2020 because of the economic recession and city lockdown measures that hurt household earnings.
Also, with treasury yields very low, investment income may have been challenged during the year.
But today investors seem to be looking past these challenges and are instead pouring funds into these companies.
As at market close on Friday, Index Investors had seen Insurance index return up to 27.6 percent while Oil/gas index had returned 21.21 percent to investors year to date, making the two indices the best performing in the market so far this year.
Both indices have outperformed the NSE All Share Index which had only delivered a meagre 1.82 percent after a fantastic year in 2020.
In 2020, NSE ASI delivered a 50.03 percent return which was marginally surpassed by Insurance Index. The insurance index delivered 50.61 percent as the Insurance stocks showed a high correlation with overall market performance. Oil/Gas index on the other hand declined -13.84 percent in 2020.
The industrial goods index which was the best performing index in 2020 with a return of 90.8 percent, is now the worst performing index among all sectoral indices with a year-to-date return of -0.03 percent. The other 2 key sectoral indices Consumer Goods Index rose 5.68 percent YTD while the Banking Index rose 4.42 percent YTD.
Overall, it has been a slow start to the year for stocks as both NSE ASI and NSE 30 have returned 1.82 percent and 2.66 percent YTD.
But investors may be anticipating a brilliant year of recovery for Insurance and Oil/Gas sectors which is why these indices have outperformed the market by more than 10 folds.