The Nigerian Stock Exchange (NSE) All Share Index emerged the best performing index globally in 2020, according to Bloomberg.
According to tracked by Bloomberg, the NSE ASI was rated as the best-performing index in the world, surpassing the S&P 500 +16.26 per cent , Dow Jones Industrial Index +7.25 per cent and other global and African market indexes, to post a one-year return of +50.03 per cent.
In its virtual 2020 Market Recap and 2021 Outlook on Tuesday, the NSE renewed investor optimism coupled with improved economic conditions and low fixed income yields propelled a year-end bull run. Of 93 global equity Indices.
Presentations were made by Chief Executive Officer, NSE, Oscar Onyema, and the Managing Director, Chief Economist, Africa and Middle East, Global Research, Standard Chartered Bank, Razia Khan, who provided insights into the global macroeconomic environment and the outlook and opportunities in the Nigerian capital market.
Delivering his address, 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 per cent, Dow Jones Industrial Index +7.25 per cent and other global and African market indexes, to post a one-year return of +50.03%.”
While taking a look at the Global Capital Market, the NSE noted that the outbreak of the novel coronavirus disease (Covid-19) and its rapid spread across the globe in the first quarter of the year triggered panic selling by global investors. According to the World Federation of Exchanges (WFE), global capital markets lost USD 18 trillion due to the pandemic over the course of February and March 2020 alone. However, diverging from grim economic projections, global markets saw a rebound following the sharp drop in March, as many indicators recovered to pre-pandemic levels by June 2020, fuelled by extraordinary stimulus packages, monetary policy actions, and public health responses from world governments and economic actors.
On product Performance, the Nigerian equities market got off to a strong start in 2020, returning 10.4 per cent by the eighth trading session. By October, the equities market entered a much awaited bull run. Buoyed by 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 per cent and erase losses of -14.90 per cent recorded in 2019. During its remarkable year-end run, the ASI gained 6.23 per cent 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 per cent, from N12.97 trillion in 2019 to N21.06 trillion in 2020 while market turnover saw an uptick of 7.25 per cent 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 per cent 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 per cent of market turnover by value (Retail: 44.98 per cent ; Institutional: 55.02 per cent ) while foreign portfolio investors accounted for 34.72 per cent.
Capital-raising activities in the fixed income market increased significantly in 2020. The NSE’s bond market capitalization rose by 35.52 per cent 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 per cent 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.
Some of the ground breaking achievements for the year include:The historic listing of Interswitch’s N23 billion 15.00 per cent Fixed Rate Series 1 bond. The premier bond listing illustrates the potential of The Exchange to support FinTechs and growth companies across various economic sectors
The listing of Dangote Cement’s N100 billion 12.50% Series 1 bond under its N300 billion bond programme which became the largest corporate bond issuance in Nigeria’s fixed income marketListing of Primero Plc’s first bond on the NSE – the Primero BRT Securitization SPV Plc bond valued at N16.5 billion.
The NSE Exchange Traded Fund (ETF) market experienced its best year yet. Market capitalization increased by 272.30% from N6.58 billion recorded in 2019 to N24.51 billion in 2020 while trade volumes increased by 218.23 per cent from 4.15 million units in 2019 to 13.20 million units in 2020, and turnover skyrocketed by 51,830.59 per cent . These achievements can be attributed to several factors including: growing adoption of the asset class by investors and asset managers on the back of strong year on year growth.
On the launch of two new ETFs, it noted that Meristem Growth ETF and Meristem Value ETF by Meristem Wealth Management Limited which track the NSE Meristem Growth Index and NSE Meristem Value Index respectively; and unattractive yields in the fixed income market which led investors to seek alternative asset classes as also experienced in the equity market.
The NEWGOLD ETF, which tracks the price of gold and offers investors the opportunity to invest in a listed instrument that is backed by a gold bullion and serves as a good currency hedge, was the best performing ETF for the second year running as it returned 66.03% in 2020, reflecting investors’ continued preference for risk-backed securities.
On the outlook for 2021, Onyema said, “The year has started on a positive note as the ASI has already returned 2.0 per cent after 11 trading sessions. We expect the marginal reopening of businesses, normalization of the economy and revenue-diversification drive of the Nigerian government to elicit positive sentiments throughout the year. Our growth expectations should be noted with caution, as the recent second wave of COVID-19 in Nigeria and globally, may slow down renewed social and economic activities.”
As the NSE transitions to a demutualised exchange group, the appointments of Mr. Temi Popoola as the CEO of NGX and Ms. Tinuade Awe as CEO of NGX REGCO were recently announced. The NSE believes that these appointments will support its vision to be “Africa’s preferred Exchange Hub” and looks forward to consolidating on the benefits of demutualization in the coming year. The Exchange also reiterated its intention to aggressively pursue cutting-edge products and services, access new markets and deliver better value to its stakeholders.