Low Fixed Income Yields, Improved Economic Conditions and Renewed Optimism Propelled 2020 Bullish Run – Onyema

Mr. Oscar N. Onyema, OON, the Chief Executive Officer, Nigerian Stock Exchange (NSE), on Tuesday, identified some of the factors responsible for 2020 end of the year bullish run during his presentation at the annual 2020 Market Recap and 2021 Outlook.

The CEO explained that while COVID-19 plunged stock prices due to huge sell-off in the first quarter, renewed investor optimism following series of adjustments made by the Federal Government to arrest the situation in the second half of the year bolstered economic conditions and stimulate the 50.3 percent gain recorded for the year 2020 by the Nigerian Stock Exchange.

Mr. Onyema stated, “The year 2020 was indeed a historic one for global capital markets. Facing buffeting headwinds, world markets saw sharp swings and steep losses but largely remained resilient and orderly amid rising uncertainty. For The Exchange, renewed investor optimism coupled with improved economic conditions and low fixed income yields propelled a year-end bull run. Of 93 global equity indices tracked by Bloomberg, the NSE All-Share Index (ASI) emerged as the best-performing index in the world, surpassing the S&P 500 (+16.26%), Dow Jones Industrial Index (+7.25%), and other global and African market indexes, to post a one-year return of +50.03%.”

Explaining the negative impact of the COVID-19 pandemic, he said the global capital market lost USD 18 trillion between February and March 2020 alone. However, global markets rebounded to the pre-pandemic level in June 2020, largely due to stimulus packages, monetary policy actions and public health responses from the world governments and economic actors.

On product performance, he said the Nigerian equities market recovered following the “formal declaration of the U.S president-elect, unattractive fixed income yields, and better-than-expected corporate earnings, the NSE ASI recovered from Q1’20, to close the year at 40,270.72 (+50.03%) and erase losses of -14.90% recorded in 2019. During its remarkable year-end run, the ASI gained 6.23% in a single trading session which triggered a 30-minute halt of trading on all stocks for the first time since the NSE Circuit Breaker was introduced in 2016 to safeguard market integrity in periods of extraordinary volatility.”

“At the close of the year, the NSE’s equity market capitalization was up by 62.42%, from N12.97 trillion in 2019 to N21.06 trillion in 2020 while market turnover saw an uptick of 7.25%, from N0.96Tn in 2019 to N1.03Tn in 2020. Although Initial Public Offering activity was mute, the value of supplementary issues increased dramatically from 2019, rising by 851.37% to N1.42 trillion, from N148.77 billion. Also noteworthy is that for the second consecutive year, equity market transactions were dominated by domestic investors who accounted for 65.28% of market turnover by value (Retail: 44.98%; Institutional: 55.02%) while foreign portfolio investors accounted for 34.72%.

“Capital-raising activities in the fixed income market increased significantly in 2020. The NSE’s bond market capitalization rose by 35.52% from N12.92 trillion in 2019 to N17.50 trillion. Continuing the trend in recent years, the Federal Government of Nigeria dominated issuances, raising over N2.36 trillion which comprised ~92% of total bond issuances. Corporates also leveraged the low yield environment to fund expansion objectives and pursue debt refinancing, raising a total of N192 billion.”