The Nigerian Stock Exchange (NSE) has attributed the sustained jumpy appreciation in prices of Nigerian equities to smart thinking by investors hunting for improved returns and the general resilience of the Nigerian stock market.
The NSE’s index circuit breaker was triggered last week’s Thursday after the benchmark All Share Index (ASI) rose beyond the 5.0 per cent threshold set for temporary halt of the market in the event of extremely volatile price changes. It was the first time the automatic index circuit breaker came on since introduction in 2016.
The circuit breaker protocol was triggered at 12:55pm when the ASI increased from its opening index of 33,268.36 points to 34,959.39 points within barely three hours of trading. The market was halted for 30 minutes for investors to take a breath and assimilate the market dynamics. The market thereafter reopened at exactly 1:25 pm, with a 10-minute intraday auction session, before resuming continuous trading till the close of the day at 2:30 pm. The market thereafter closed with average gain of 6.23 per cent for Thursday.
Speaking at the weekend, Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, said the sustained rally at the equities market demonstrates the opportunities that abound in the market for discerning investors.
Onyema spoke at the 5th Data Workshop 2020 of the NSE, which was held virtually. The theme of the workshop was “Handling Shocks in the Capital Market: A Quantitative Risk Management Approach Using Market Data”.
He noted that while Nigerian equities recorded negative performance in the first quarter of the year, with the ASI posting a quarterly return of -20.65 per cent in first quarter 2020, the market has seen an upswing since April 2020. The ASI closed weekend with average year-to-date return of 30.53 per cent.
“This feat – particularly during the COVID-19 pandemic – can be attributed to smart investors bargain hunting and the release of positive year-end financial results of several listed companies, coupled with improved dividend declarations. It demonstrates the opportunities that abound in the market for discerning investors, even in a time of crisis, and underscores the importance of quality market data for investment decision-making,” Onyema said.
The NSE pointed out that the Exchange has remained resilient even in the face of the COVID-19 pandemic with domestic investors continuing to show interest in the market. Total value of transactions executed by domestic investors on the NSE stood at N731 billion in the first eight months of 2020, as against N470.20 billion total foreign transactions during the same period. This showed that domestic investors outperformed transactions executed by foreign investors by N260.8 billion or 55.47 per cent.
According to the Exchange, equities were also responding positively to macroeconomic policy changes such as the cut in Monetary Policy Rate (MPR) by 100 basis points from 12.5 per cent to 11.5 per cent by the Central Bank of Nigeria (CBN) in September 2020.
“It has also been observed that investors are targeting Nigerian companies with strong fundamentals with the expectation that they will best overcome the onslaught of COVID-19 and be able to distribute dividends to shareholders. This is particularly important given the low-interest-rate and negative real yield environment,” NSE stated.
The Exchange also pointed out the resilience and effective trading and regulatory systems at the market noting that the market has continued to provide a platform for companies to raise capital and for investors to meet their financial objectives despite restricted access and disruptions caused by COVID-19 pandemic and social unrests.
The Exchange added that it has also successfully transitioned many of its physical engagements to digital events including its flagship closing gong ceremony, facts behind the figures series, chief executive officer engagement sessions, trainings and workshops to further deepen engagement with capital market stakeholders.
Meanwhile, experts who spoke during the market data webinar underscored the importance of data as a fundamental tool for making sound financial decisions.
Speakers highlighted the importance of building financial and investment models that can be tested with real-life situations noting that unprecedented events of 2020 have proven that reliable real-time and historical data that can easily be understood and are invaluable in building successful investment models.
Experts agreed that quality and accessible data is critical not only to dealing with the problems of today but in mitigating the crises of the future.
NSE also highlighted its wide range of market data products and solutions across all asset classes including the NSE API, which ensures the dissemination of real-time data to stakeholders; FIX Order Management System, which allows trade information to be transmitted from anywhere to the Exchange; and the recently upgraded X-DataPortal, which serves as a consolidated, streamlined platform for market participants to access quality and timely data at an affordable rate.
