Renewed interest in the Nigerian stock market spurred bargain hunting in the third quarter (Q3) of the year as investors’ investment went up by N1.196 trillion.
The key performance indicator of the Nigerian Exchange (NGX) Limited, the All-Share Index (ASI) went up by 6.10 per cent to close at 40,221.17 points on September 30, 2021 from 37,907.28 points at which it opened trading on July 1, 2021. Similarly, market capitalisation for the period gained by N1.196 trillion to N20.956 trillion from N19.760 trillion.
Performance across the major sectoral indices was positive during the period as at September 30, 2021, with the NGX Oil & Gas index leading with 17.31 per cent gain. NGX Premium index followed with a gain of 15.38 per cent while NGX Industrial Goods index was up by 10.68 per cent.
NGX Lotus II, NGX 30, NGX Pension and NGX Banking indices closed Q3 in a positive territory with a gain of 5.23 per cent, 4.99 per cent, 4.90 per cent and 1.20 per cent, respectively. On the other hand, NGX Insurance index declined by 15.11 per cent while NGX Consumer Goods lost 5.61 per cent in the period under review.
Meanwhile, a fresh report released by the NGX on domestic and foreign portfolio participation in equities trading showed that total equities market transactions declined marginally in August 2021 compared to the volume of transactions executed in July 2021 as foreign portfolio investors sold more than they bought, hence further moving out of the local equities market. However, the domestic institutional and retail investors gradually moved into the market to pick up the sold shares at cheaper prices.
Capital market analysts noted that the local investors appeared to be bullish amid releases of corporates’ half-year financial results, which have been generally positive and the prospect for half-year dividend payments in the month of September.
Notably, the relative downward trend in interest rates, especially for 364-day treasury bills also contributed to the increased transaction inflows by local investors on the domestic bourse month-on-month. The stop rate for 364-day T-bill fell to 6.80 per cent in August from 8.20 per cent at the end of July 2021; as at the last auction on September 29, 2021, stop rate stood at 7.50 per cent.
The chief executive officer, Sofunix Investment and Communications, Sola Oni: “Investors are taking advantage of rock-bottom prices of some blue chips to beef up their portfolios. This is a period of portfolio re-balancing in anticipation of improved corporate earnings. By this, some stocks may be sold in order to purchase others, depending on the investor’s risk and return analysis. This can trigger massive demand for some stocks with upward price movement.”
The vice chairman, Highcap Securities Limited, Mr David Adnori, attributed stock market decline performance in nine months to higher yields in money market instruments, stressing that the stock market in the fourth quarter is expected to appreciate.
According to him, the stock market declined because of movement of assets to money market instruments. However, the impressive results of listed companies attracted investors to the stock market between July and August.
“The rebound in the stock market was sustained because of steady increase in global oil prices. The recovery of the stock market could have been better but insecurity in the nation led to a hike in inflation rate and investors had to react negatively,” he said.
A stockbroker and capital market analyst, Mr Rotimi Fakayejo, expressed optimism that the stock market in 2021 might close positive despite numerous challenges.
According to him, the stock market has performed better despite all odds. In the same period, Dangote cement with N280 as at September has reached a one-year high. I think securities listed on NGX have maintained stability, resilient and impressive earnings. There is the likelihood that the stock market might close positive.
In Q4, Cowry Assets Management Limited expects the equities market to be bullish in the last quarter of the year amid improved corporates’ half-year financial results churned out by most companies on the exchange.
“Specifically, we are positive on some of the tier-1 banking stocks such as Zenith Bank and United Bank for Africa (UBA) as they are likely to sustain or increase their dividend pay out. Meanwhile, amid other benefits surrounding the digital currency, its operability would depend on its reach and availability of internet services, among other things,” it stated.