Nigerian Equity Market: The only game in town

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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.

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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.

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United Capital Plc Research

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Read Also:  How did the Nigerian equity market become the second-best performing equity market in the world?

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