Stock Market Sheds N1.01trn In April

The Nigerian stock market depreciated by N1.010 trillion in April 2023 amid impressive 2022 financial year corporate earnings and dividend payout to shareholders by listed companies.

Although the stock market has gained 2.25 per cent in four months of 2023, inflationary pressure, scarcity of foreign exchange, among other macroeconomy challenges have continued to erode investors’ participation in low-priced fundamental stocks listed on the Exchange.

Specifically, the overall market capitalisation closed April 2023 at N28.534 trillion, dropping by N1.010 trillion from N29.544 trillion. Also, NGX All-Share Index dropped by 3.37 per cent to 52,403.51 basis points from 54,232.34 basis points it closed for trading in March 2023.

Sectoral performances revealed that NGX-Main Board Index depreciated by 3.71 per cent to close at 2,349.99 basis points, while NGX banking Index was down by 1.55 per cent to 438.07 basis points as of April 28, 2023.

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As NGX Insurance Index appreciated by 3.87 per cent to 184.38 basis points, NGX Oil/Gas Index dropped by 1.68 per cent to 502.24 basis points. In addition, NGX Consumer Goods Index appreciated by 4.75 per cent to 736.14 basis points, the highest gainer among other indices on the floor of the Exchange, while NGX Industrial Goods Index depreciated by 0.38 per cent in April 2023.

Market analysts attributed the decline in the stock market to 2023 general elections, stating that foreign investors and Pension Fund Administrations (PFAs) were on the side-line to know the outcome of the elections.

Analysts at Investment One in a report titled, ‘2022 review and 2023 macro-economic and financial market outlook’ said the direction of market performance will be largely determined by the trio impact of fixed income yields in tandem with monetary policy, corporate actions, and election turnouts.

According to the firm, ditto to our outlook of tepid movement in yields in the fixed income space and expectations of a less aggressive hawkish tone from the CBN, negative real returns should remain relatively high in the fixed income space giving room for alpha-seeking investors diverting more funds to equities as it remains a solid channel for positive real returns.

“For Corporate earnings, we are cautiously optimistic of a positive earnings performance in 2023 given the negative impact of high inflation pressures, increased monetary policy tightening and FX instability. Although we expect a broad-based resilient performance, we do not see a significantly upbeat performance as the aforementioned factors remain deterrents,” the report added.

Analysts advised investors to trade with caution as the uncertainties continued to rock the 2023 elections, maintaining their positive outlook on dividend yields and capital appreciation in bellwether stocks.

Speaking on the outlook of the stock market in 2023, the managing director/chief economist at Analysts Data Service and Resources Limited, Dr Afolabi Olowookere, disclosed that while recent evidence suggests the market performance during pre and post elections comes out negative, it is expected that the stock market might close in the negative territory at the end of the year.

“The past may not necessarily be the one we might see in future. In the last three years of election, the market had closed in the negative and so looking at it, stock market returns might likely close at -16 per cent at the end of the year and this will be centered on factors like uncertainties around the outcome of the elections, low capital inflows and rising inflation,” Olowookere added.