The Nigerian Exchange (NGX) market capitalisation, which represents the market value of all listed companies, gained N2.441 trillion in the first quarter (Q1) of the year, despite election jitters.
Nigerians, on February 25 and March 18, 2023 went to the polls to decide the next leaders of the country.
However, the overall market performance measured by All-Share Index(ASI), which tracks the general market movement of all listed equities on the Exchange, rose by 5.11 per cent to close at 54,232.34 points in the first three months of the year from 51,595.66 points it closed on December 30, 2022.
Also, the market capitalisation gained N2.441 trillion to close on March 31, 2023 at N29.544 trillion from N27.103 trillion at which it opened for trading activities on January 3, 2023.
The sector performance was bullish as most indices closed the period on uptrend as at March 31, 2023. NGX Consumer Goods index appreciated the most by 19.32 per cent. NGX Premium Board index followed with a gain of 11.97 per cent, while NGX Oil & Gas index rose by 10.45 per cent.
Others are; NGX Lotus II index, NGX Banking index, NGX Pension index, NGX 30, NGX Industrial Goods index and NGX Insurance went up by 8.79 per cent, 8.50 per cent, 6.35 per cent, 4.93 per cent, 2.21 per cent and 1.81 per cent in that order.
Finance analysts noted that “the positive sentiment during the period was attributed to change in the holding structure of the market since foreign investors left the market on the grounds of COVID-19 and local investors dominated with increased buying interest due to the better-than-expected corporate earnings post-COVID and higher dividend payouts.”
The managing director of HighCap Securities Limited, Mr. David Adonri said, investors are in the earning season and what investors will get from dividend is one of the factors that is driving the demand of shares in the market.
He noted that the equities market is defying current political uncertainties because investors are futuristic that the prospect for yield environment is bright, saying, “we are in the earning season, when the market normally sustains positive sentiment, but this season is within the period of an election. I think the crave for dividend is overshadowing what would have been the impact of the elections.”
The managing director, Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe, stated that, a demographic shift has happened in the NGX in the last few years, saying, “we now have more local institutions and retail investors in the market than foreign portfolio investors.
“The reverse use 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 is why you see the NGX ASI continuing to rise despite all the uncertainties in the environment.”
Similarly, a report from Cordros Securities Limited said: “we expect investors positioning for 2022 full year results ahead of upbeat corporate earnings and re-investment of dividends to drive bullish sentiments in Q1, 2023.
“Nevertheless, in the latter part of the year, we believe that market sentiments will be shaped by a combination of the outcome of the 2023 elections; market-friendly policy or reforms; the direction of monetary policy and impact on fixed income yields; sector-specific events; and the weak macroeconomic environment.”
The investment firm believes there is scope for slight expansion in valuation multiples in H1, 2023 as long as corporate earnings remain resilient.
Thus, it stressed, investors will likely continue to seek relative safety in value stocks as they remain concerned about the market’s volatility, political and economic uncertainties, and higher interest rates.
On the market outlook, the chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion stated that, “we expect improved sentiments and mixed trend as players analyze recent earnings that hit market, ahead of more earnings reports in the midst of expected quarter end window dressing and price adjustment for dividend.
“We note that income investors continue to target dividend paying and defensive stocks to protect their portfolios post-dividend adjustments. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction.”
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