It had been a challenging year for the world, for both individuals and businesses alike because of the COVID-19 outbreak that started in Wuhan China in late 2019.
As the virus spread out of China, and the WHO declared it a Pandemic, global stock exchanges around the world went into a tail-pin, the Nigerian Stock Exchange included. Although the market began the year with a continuation of the bear run that has persisted since 2018.
The All-Share Index stood at 26,842.07 points as of 31st December 2019 and by the time the first case was confirmed in Nigeria on February 27th, it had risen to 29,628.84 points as Investors positioned for dividend and fallen back to 26,808.24 points.
Then came the lock down, and the market endured sustained sell pressures for the entire month of March, hitting rock bottom on 6th April when it closed at 20,669.38 points.
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From then the rally back upwards began, culminated in a 94.83% rise from the April low to close at 40,270.72 points.
The Nigerian Stock Exchange enjoyed its best performance in many years, as its benchmark index, The NSE All-Share Index (ASI) advanced by 50.03%.
We believe that this performance is skewed because of the weight of the 4 most capitalized stocks, which combined to account for N13.45 trillion of the N21.06 trillion entire market capitalization of the NSE.
In other words, DANGCEM (N4.17 trillion), MTNN (N3.46 trillion), AIRTELAFRI (N3.20 trillion), and BUACEMENT (N2.62 trillion) accounted for 63.86% of the entire market capitalization. A shift in any of these stocks, could on its own shift the direction of the NSE ASI.
Indeed, these stocks had moved significantly in the year; AIRTELAFRI by 184.90%, BUACEMENT by 101.17%, DANGCEM by 72.46% and MTNN by 61.81%.
A review of the major indices of the NSE shows that skewed nature of the market performance; Insurance Index was up by 50.61% (It carries low cap. Stocks that has little impact on market direction), Banking Index was up by 10.14% (it carries the banking stocks that make up most funds’ portfolio), Consumer Goods Index was down by -3.29% (it carries the 5th most capitalised stock; NESTLE which gained only 2.39% in 2020), Oil & Gas Index was down by -13.84% while the Industrial Goods Index was up by 90.81% (it carries DANGCEM and BUACEM).
In addition to the above indices is the ICT whose record over the year is not readily available at the time of this write-up. The ICT Index holds the second and third most capitalised stock in the market; Airtel Africa Plc and MTN Nigeria Plc.
We can conclude therefore that the 50.03% growth of the Nigerian Stock Exchange benchmark index can be attributed to the four most capitalized stock it holds.
Fig: NSE All-Share Index performance in 2020
By; Nnamdi M.
