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Wednesday, September 27, 2023

No year-end Santa Rally as Stock Gains Muted to Close 2021

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Customs Street hopes have been dashed as the stock market failed to deliver late gifts to investors amid a lukewarm yuletide.

This is because the market did not experience “Santa Claus Rally’ in December, the second time in 10 years, but the NGX ASI is poised to close the year on a positive note.

This is a term given to the phenomenon of a rally in the stock that usually happens in the last week of December in a year and the first two days of January the following year.

Interestingly, the NGX ASI Index Year to Date (YTD) closed +4.90 percent, albeit it fell from 5.20 percent the previous week.

The domestic market closed the week on a bearish note as the NGX All-Share Index declined 0.2 percent w/w to settle at 42,262.85 points.

For instance, the rally in the equity market has been bolstered by the news of the receipt of approval-in-principle licence by the two telecoms giants: MTN Nigeria and Airtel.

Also, the proposed acquisition of Honeywell Flour Mills of Nigeria by Flour Mills of Nigeria in November enhanced investors’ sentiments towards stocks.

The last quarter of 2021 saw some animated activities in the equity market that lifted investor optimism as MTN Group was in the market to sell up to 575 million shares out of its holdings in MTN Nigeria Communication Plc to retail investors.

Of course, the bellwether firms have been alluring investors with attractive dividend yields and MTN Nigeria has a dividend payout of 80 percent while Zenith Bank has a dividend yield of 12 percent.

The third quarter earnings report which was impressive has given market participants a glimmer of hope that they will be rewarded generously from distributable profits and that cash flows are not under any pressure whatsoever.

The largest and most liquid firms on the bourse otherwise known as the NGX ASI 30 Index collectively grew net income by 30.60 percent to N1.50 trillion as at September 2021, according to data gathered by MoneyCentral.

Their combined revenue was up 18.63 percent to N8.67 billion in September 2021 from N7.30 billion as at September 2020.

Profit margins were strengthened by the gradual reopening of the economy and successful rollout of vaccines as life returned to normal after the paralyses stoked by the coronavirus pandemic.

The Nigerian economy grew by 5.01 percent year on year (yoy) in Q2 2021, according to a recent report by the National Bureau of Statistics (NBS).

First Bank of Nigeria Holding is among Africa’s best performing stocks for 2021 with +75 percent year to date, according to Tellimer Research.

The lender got a pat at the back for cleaning toxic debts from its books as on performing loans reduced to 7.30 percent currently from 24.40 percent as at December 2021.

Also, the Group tightened the screws on its corporate governance as the central bank dissolved the former board headed by the ousted chairman Obafunke Oduteko, a strategic plan that led to the buying of a significant stake by billionaire, Femi Otedola.

According to the recently released NGX Domestic & Foreign Investment report for November 2021, the total value traded on the local bourse, albeit still high, declined by 7.95 percent month on month (m/m) to N196.1 billion ($472.5m) in November from N213.1 billion ($513.3m) in October.

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