Corporate Earnings Triggers N1.708trn Equities Investments Gain In October

The Nigerian equities market gained N1.708 trillion in the month of October 2023 as investors reacted to better-than expected corporate results released on the Nigerian Exchange.

The month of October was eventful, marked by the influx of impressive corporate earnings reports at its peak. The better-than-expected corporate earnings despite the gloomy economy has impacted the market positively at a time the rising inflation has left fixed income market instruments in negative real returns.

These strong numbers came majorly from the service-oriented companies on the Exchange, cutting across Banking, Insurance, Energy, Power, Agribusiness, Construction and Aviation Service Companies.

The market capitalisation gained N1.708 trillion from N36.331 trillion at the beginning of the month to close at N38.039 trillion at the end of October 31, 2023. Similarly, the Nigerian Exchange (NGX) Limited All-Share Index (ASI) rose by 4.30 per cent from 66,382.14 points on September 29, 2023, to 69,236.19 points on October 31, 2023.

Also, sector performance was bullish as most indices closed the period on uptrend as of October 27, 2023. NGX Banking index appreciated the most by 5.27 per cent month-on-Month (M-o-M). NGX Industrial Goods index followed with a monthly gain of 3.35 per cent, while NGX Oil & Gas index rose by 2.38 per cent.

Others are NGX 30, NGX Consumer Goods and NGX Pension indices went up by 1.11 per cent, 1.06 per cent and 0.18 per cent respectively. On the other hand, NGX Premium index, NGX Insurance and NGX Lotus II indices recorded monthly declines of 4.40 per cent, 4.24 per cent and 0.85 per cent respectively.

Recall that, on October 6, 2023, VFD Group Plc got listed on the Main Board of Nigerian Exchange Limited (NGX), adding over N45 billion to the market capitalisation of NGX, further boosting liquidity in the Nigerian capital market and providing opportunities for wealth creation.

Speaking on market performance for October, the chief operating officer of InvestData Consulting Limited, Ambrose Omordion said: “trading on the Nigerian Exchange last month was buoyed by renewed buying interest after sell sentiments, which had pulled the market down in September, as more impressive corporate scorecards were made available to the investing public in the face of high volatility, increasing liquidity and macroeconomic headwinds.”

He stated that many companies across various sectors posted impressive numbers, while some recorded mixed performance and others were disappointing.

On market outlook, Omordion said:  “we expect buying sentiments to continue as investors and bargain hunters react to the better-than-expected corporate numbers released so far. As more Q3 earnings reports are expected in the face of sector rotation. Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.”

He however said: “pullbacks are creating ‘buy’ opportunities amidst the economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer investment direction eventually.”

The vice president of Highcap Securities, David Adonri, said the gain reported by the equities market in October is on the backdrop of impressive nine months ended September 30, 2023, corporate earnings, stressing that foreign investor, most especially, utilised the cheap price of some fundamental stocks on the bourse.

He added that the overall market performance is driven majorly by sentiment arising from the smooth handover and President Bola Tinubu’s bold economic policy on foreign exchange.

According to him, Tinubu’s prompt change of security chiefs also boosted investors’ confidence. The removal of Godwin Emefiele as Central Bank of Nigeria (CBN) Governor was another icing on the cake which impressed investors. All these added to the usual end-of-quarter rally to propel the equities market.

“Since the huge gain was propelled by investor sentiment, interest in equities in H2, 2023 can only be sustained if the policy changes translate into growth in corporate fundamentals and a fall in interest rate, otherwise, we might see a market correction that may purge equities off the sentiment that inflated it in seven months of 2023.”