Equities trading on the Nigerian Exchange Limited (NGX) concluded the first month of 2024 (January) with notable positivity, propelled by a notable surge in investor confidence directed towards listed corporations.
This exceptional performance stands as a milestone in NGX’s history, defying prevailing economic challenges such as elevated inflation, a depreciating exchange rate, and persistent security concerns.
The prevailing optimism manifested in discernible shifts in purchasing behavior, culminating in the All-Share Index reaching a noteworthy close at 101,154.46 index points by the end of January.
This figure represents a substantial 35.3% escalation from the previous year’s conclusion.
Moreover, the year-to-date (YTD) return of the NGX All-Share Index underscores its resilience, standing at an impressive 35.3%.
Despite the backdrop of escalating inflation, prospective interest rate adjustments, and volatile exchange rates, investor confidence has displayed remarkable steadfastness. This unwavering assurance has, in turn, spurred heightened market activity and intensified buying engagements.
All-Share Index crosses 100,000 points for the first time
Equity trading on the Nigerian Exchange Limited (NGX) had closed trading on Wednesday, January 24th, 2024, in the green territory as the NGX All-Share Index appreciated by 3% to cross 100,000 index points hitting 101,571.11 points.
The development was unprecedented in the history of the Exchange being the first time the Exchange will achieve the feat.
According to Nairametrics report, before crossing the 100,000 points, NGX had secured its position as the world’s best-performing stock market in the first three weeks of 2024, capping off the trading day on January 19, 2024, at an impressive 94,538.12 points.
With a remarkable year-to-date return of 26.43%, the NGX has outshone its global counterparts.
Taking the second spot is the S&P Merval Index, reflecting the performance of the Argentine Stock Exchange (BYMA), with a year-to-date return of 26.37%.
The market positive sentiment among investors is being attributed to several factors, including favourable policies introduced by President Bola Tinubu’s administration such as the removal of fuel subsidies, streamlining of exchange rates, the floating of the naira and investors strategically positioned themselves and taking advantage of the recent record earnings posted by quoted firms.
Market performance
However, for the first time in 20 days massive sell offs triggered at the NGX on 30th of January and extended to 31st following profit takings. For the two days, the NGX closed in the bearish zone as the All-Share Index declined by cumulatively by 3.36% to close at 101,154.46 points, a decline of 3,520 from 104,674.67 points it closed on Monday 29th.
- Consequently, available statistics to the Nairametrics showed that the All-Share Index, which is the broad index that measures the performance of Nigerian stocks, opened the trading month at 74,773.77 index points at the beginning of trading on January 2, 2024, and closed at 101,154.46 points at the end the month on January 31, gaining 26,380.68 basis points or 35.3%.
- Further analysis revealed that activities on the Nigerian Exchange Limited (NGX) which opened the trading month at N40.917 trillion in market capitalization at the beginning of trading, closed the month at N55.357 trillion, hence has earned a month-to-date gain of about N14.440 trillion.
What the market analysts are saying
Mr. David Adonri, Executive Vice Chairman, of Hicap Securities Limited in a chat with Nairametrics said that investors were in the earning season and that what investors will get from dividends is one of the factors that drove the demand for shares in the market during the period.
He noted that the equities market is defying current political uncertainties because investors are futuristic that the prospect for a yield environment is bright.
- “Most companies, especially banks, released their half-year results during the quarter. The market normally sustains positive sentiment during the earning season.
- However, the season was within the period when election cases are still being determined in the courts, but I think the craving for dividends overshadowed what would have been the impact of the elections,” he said.
The Managing Director, of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe in a chat with Nairametrics said that a Demographic shift has happened in the NGX in the last few years.
- “We now have more local institutions and retail investors in the market than foreign portfolio investors. The reverse used to be the case, this shift has naturally reduced volatility in stock prices as the locals are likely to have more faith in the local market than foreigners. That’s why you see the NGX ASI continuing to rise despite all the uncertainties in the environment.”
Amolegbe further said that the expectation that the policies will encourage the inflow of foreign investment is the primary trigger that is causing the stock market rally.
- “The second trigger will include the fact that some of these policies will lead to a short-term increase in inflation level and typically stock prices tend to rise along with inflation,” he said.
- He explained that the other driver might also be the fact that we are moving toward the end of the first half of the year, and this normally leads to portfolio rebalancing by fund and asset managers,
- “They rebalance their portfolio every quarter and every half year and this normally results in the stock rally,” he said.
Analysts’ market outlook
Mike Ezeh, the Chief Executive Officer of Crane Securities Limited, said, the emergence of President Bola Tinubu further energized the market since market participants have hope in his ability to rejig the economy and implement economy-friendly policies.
- “The elections came and were hitch-free against all unification of the multiple exchange rates, review of monetary and fiscal policies, a shake-up of major changes carried out at the apex bank and its overflow down to the deposit money banks across the country brought stability to the market.
- “The commissioning of the first indigenous private refinery which has a cyclical effect on both upstream and downstream operations of petroleum companies quoted in the market propelled the interplay in the market by some high-net-worth investors on many quoted companies resulting in high turnover in trading volumes of those companies leading to the significant increase in market capitalization within the period.”
He urged the new government in 2024 to continue to implement policies that would provide an enabling environment for businesses to thrive, saying this would help boost the nation’s Foreign Direct Investment (FDI) and attract issuers to the capital market.
Commenting, Tajudeen Olayinka, Analyst, and CEO, of Wyoming Capital and Partners said:
- “The stock market has been quite eventful and bullish in 2023, and can reasonably project further improvement in 2024, as more companies approach the market for listing and public offerings.
- The fact that government will depend largely on the use of private capital in addressing infrastructure deficit, means that we will see a better capital market.”
In his projection for 2024, Victor Chiazor, Analyst and Head of Research at FSL Securities Limited said:
- “Government policies around foreign exchange and subsidy removal hurt the economy.
- In 2024, we anticipate some level of normalization around recent policy statements by the government hence, the equities market is expected to be driven by company performance as well as new pro-market policies.”
