The Nigerian equity market recovered significantly in the month of September-2020, as the NSE-ASI was up by 5.1% m/m to close at 26,612.0 points. As of October 5th, YTD returns is up 2.7%, back its pre-COVID 19 levels. Clearly, the recent rally is driven by the low-interest rates environment which dawned on the market amid the surprise rate cut by MPC during its September policy meeting.
Notably, a cross-sectional analysis of markets in Africa indicated that Nigeria is currently the best performer among peer, at 2.7% YTD compared to Ghana (-17.7%), S/Africa (-4.7%), and Kenya (-15.8%). Clearly, performance in Nigeria is driven by the CBN’s unorthodox monetary policy mix which puts real interest rate at -5.5% and yield environment at low single-digit compared to positive real interest and high yields in many peer markets.
Furthermore, Sectoral analysis showed that all five sectors indices under our coverage closed the month on a positive note. The consumer goods sector (+8.1%) advanced the most. Followed by the Insurance sector (+5.2%), Industrial goods sector (+4.6%), Banking sector (+4.4%) and the oil and gas sector (+2.1%).
This month, we expect that the positive sentiment in the equities market will be sustained as investors position for Q3-2020 earnings publications. Also, we expect some of the scheduled OMO maturity of N1.7tn in Oct-2020 to filter into the equities market as investors continue to search for alpha returns.
Overall, we are of the view that the equities market is not only in correction mode but set for a positive close for the year. As such, we advise hesitant investors to get involved. close for the year. As such, we advise hesitant investors to get involved.
United Capital Plc Research