Equity market
Investors’ risk appetite for Nigerian stocks has sustained its uptrend for the third consecutive week with investors smiling all the way to the bank after recouping N145 billion profit to close equity trading this week.
The development led to 0.48 rise in the market’s All-Share Index (ASI), the benchmark tracker of price movements at the Nigerian Exchange Limited (NGX). The Index added 265.3 points to close at 55,794.51 basis points as its year-to-date return got a nudge to 8.9%.
Similarly, market capitalisation that represents the monetary valuation of all listed companies on the domestic bourse closed higher at N30.395 trillion after the N145 billion profit recorded for the week.
A cursory look at the weekly stock performance in the week by BUSINESS METRICS showed that Dangote Cement and MTN Nigeria inflated the overall profit the most as their share prices advanced by 3.6% and 1.4% respectively.
However, Sectoral performance was mixed as the Oil & Gas index shed -3.8%, followed by Banking and consumer goods indices, each shedding -1.8% and -0.3%, in that order.
In contrast, the Industrial Goods and insurance indices closed in the green territory by gaining +1.7% and +0.7% respectively.
Factors shaping the market
Investment analysts have ascribed the performance of the equity market in recent time to many factors such as impressive corporate earnings reports released for the full year 2022 by listed companies.
According to them, as many of these companies also declare mouth-watering dividend payouts, investors are seen rebalancing their portfolios to take position for the capital rewards on their investment.
“Buying interests among market players in large cap companies that announced their dividends supported the performance, even when Treasury Bill’s primary market auction rates adjusted up further,” said Ambrose Omordion, Chief Investment Expert at Investdata Limited.
Meanwhile, Azeez Lawal, an investment expert at Capital Bancorp Limited, emphasised that the exodus of foreign investors from the Nigerian capital market and domination of transactions by their local counterparts have helped the market to maintain stability.
He said, “Local investors are the ones helping the equity market to sustain its stability because no matter the economic headwinds, they remain in the system. Market rises steadily and adjust moderately, but the market is solid because local investors don’t put too much pressure.
“Personally, I believe we don’t even need the foreign investors because local investors can sustain the market. Yes, foreign investors come in with a lot of funds to inflate share prices, but by the time they pull out all of sudden, they plunged the prices below how they have met it. So, minimal influence of expatriates at the market has helped to sustain its bullish trend without excessive profit-taking or sell-off pressure.”
Turnover
Meanwhile, during the week under review, weekly activity levels on the exchange were mixed, as trading volume declined by 46.4% while trading value grew by 18.6%.
Specifically, a total turnover of 1.023 billion shares worth N20.221 billion in 18,650 deals was traded this week by investors on the floor of the Exchange, in contrast to a total of 1.910 billion shares valued at N18.436 billion that exchanged hands last week in 20,311 deals.
In terms of volume of trades, the Financial Services Industry led the activity chart with 414.427 million shares valued at N5.646 billion traded in 8,136 deals; thus contributing 40.50% and 27.92% to the total equity turnover volume and value respectively.
The Conglomerates Industry followed with 307.868 million shares worth N479.512 million in 1,122 deals, while the third place was the Industrial Goods Industry, with a turnover of 104.234 million shares worth N10.354 billion in 1,334 deals.
Meanwhile, Transnational Corporation Plc, Guaranty Trust Holding Company Plc and BUA Cement Plc emerged stocks with highest traded volume, as they jointly accounted for 447.809 million shares worth N9.556 billion in 2,018 deals, contributing 43.76% and 47.26% to the total equity turnover volume and value respectively.
Analysts see unbroken bullish trend
Despite the pocket of gains recorded in the previous weeks, equity market analysts have predicted minimal pressure from profit-taking experience, thus forecasting trends in favour of the bulls.
Analysts at Cordros Capital stated in a note available to BUSINESS METRICS that they expect market performance to be dominated by the bulls in the week ahead, waiting for investors to take positions in stocks with attractive dividend yields.
“However, we envisage an undulating pattern will emerge as intermittent profit-taking activities will likely persist. Overall, we advise investors to seek trading opportunities in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings,” they said.
In a related development, analysts at Cowry Assets expect a mixed trend to continue in the week ahead in the market as investors react to the dividend and position for the anticipated financials from primarily tier-1 banks.
“While market players place their bull’s eye on dividend-paying companies and defensive stocks to protect their portfolios ahead of the governorship election and post dividend adjustment, we advise investors to trade companies with sound fundamentals and, as such, should take advantage of price corrections in line with domestic and global trends,” they said.
