How Telecoms, Consumer Goods Contribute N12tn to Stock Market Capitalisation

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How Telecoms, Consumer Goods Contribute N12tn to Stock Market Capitalisation

 

Investors shifted focus to some stocks with strong valuations, spreading across Consumer Goods Sector,  the Premiums sub-sector and Telecommunication Sector which accounted for 53 percent of the entire market capitalisation in 2020.

A Capital Market Analyst, Mr Rotimi Fakayejo, confirmed that these sectors had added N12 trillion out of the N20 trillion stock market capitalisation for the year under review.

Fakayejo stated that BUA Cement Plc contributed 75 percent, while Dangote Cement Plc also added above 100 percent to the growth of Industrial Goods sector.

The NSE commenced trading for the year on Thursday, January 2, 2020, with the All-Share Index of 26,842.07 points to close trading on Thursday, December 31 at 40,270.72 basis points. The Market Capitalisation, which also opened the year at N12.97 trillion closed for the period under review at N21.56 trillion.

But, Fakayejo who observed that there was no substantial trading in the banking sub-sector in 2020 wondered what influenced the uptick in the All-Share Index and Market Capitalisation.

“When you look at over N20 trillion Market Capitalisation, both Mtn and Airtel of the telecommunications sector contributed more than 120 percent appreciation to the sector. The Industrial Goods Sector, BUA Cement went up for about 75 percent, Dangote Cement also contributes more than 100 percent to the sector. Both Telecom and Industrial Goods sub-sectors posted 53 percent, translating to N12 trillion of the entire market value.

“ At the beginning of the year, the stock market activities completely went down from the month of March. Thereafter, we saw it rebounding. For now, we see about 38 percent Year-Till-Date positive return in the stock market. I hope to see more activities in the banks, insurance and other financial services sector early in the year 2021.

“It seemed there are no other attractive investment windows in the Nigeria financial market for now. This implied that the equities market remained the only viable place of investment. Also, the absent of Foreign Portfolio Investors (PFI) will go a long way to effect a gradual but positive change in the stock market”, he said.

Speaking on his expectations from the market in 2021, the investment analyst said that the outlook was good, “except there are some crazy policy decisions from the Central Bank of Nigeria (CBN), which always affect capital market activities negatively.

“For instance, in 2018, the CBN came up with a policy that The  NSE should not allow quoted companies to pay dividends to shareholders. At the end of the day, it agreed to pay it. The government reverted her policy because of the immediate negative impact it had on capital market activities as an information-driven institution.  So, if such policy was not issued, there will be positive trading in the first quarter, 2021”, he said.

Fakayejo advocated for consistency and continuity in the policy-making and implementation to enhance stock market growth in 2021.

According to him, if investors have confidence in the government policies, they will be encouraged to pull out their money to invest because there will be sanity in the equities market and that alone will make it more attractive for investors to put-in their money.

“By the time the government came up with plans to issue special treasury-bills, there was a counter-reaction from the stock market activities. And when the government realized the policy cannot be sustained, the plan changed and the market bounced back”, Fakayejo said.

 

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