Equities extend gains: A look at Nigerian markets

The Nigerian equities market has seen extended gains, driven by a mix of telecoms, banks, and oil stocks, lifting the local bourse. Despite a lackluster performance earlier in the week, the market experienced positive momentum from Wednesday onwards, culminating in a week-on-week gain of close to 2%. Investors have been reacting to various earnings reports released during the week, with top gainers including B&H, Ceplat, and other securities likely responding positively to these results. However, the market lacks major catalysts driving movements, with investors seizing short-term opportunities for gains. In terms of sector attractiveness, banks have emerged as the most appealing due to sustained pressure on consumer goods amidst macroeconomic challenges. Consumer goods have witnessed a significant year-to-date loss of 30.8%, contrasting with the relative resilience of banks. Despite macro weaknesses, Nigerian banks exhibit attractive valuations when compared to their regional counterparts, maintaining solid bottom line performance despite some slowdown in top-line growth.Moving forward, the looming deadline for the Loan-to-Deposit Ratio requirement for banks by September 30 may not drastically alter industry dynamics, with only a few banks likely to be significantly affected. As for broader macroeconomic issues, the market is closely monitoring fiscal developments like the recent 2020 budget projections and GDP forecasts. With GDP growth expected to remain below 4% until 2022, investors are assessing the implications of a low-growth environment on listed companies operating within the market. While fiscal policies play a role, market sentiment is more influenced by monetary decisions, which have a more immediate impact compared to fiscal measures. The market is attuned to monetary policy developments rather than fiscal changes, anticipating how these decisions will shape company performance in the coming quarters.