Nigerian stocks investors recorded a growth of N5.638 trillion on investment return in the first half (H1) of the year despite pre-election jitters.
The market capitalisation gained N5.638 trillion from N22.297 trillion at the beginning of the year to close at N27.935 trillion at the end of June, while the Nigerian Exchange (NGX) Limited All-Share Index (ASI) rose by 21.31 per cent from 42,716.44 points on December 31, 2021 to 51,817.59 points on June 30, 2022.
Market analysts stated that at the start of the year, the market performance has been broadly positive in the first half due to the blend of positive 2021 full year corporate earnings, dividend declarations and depressed yields in the fixed income market.
Speaking on market performance, Cordros Securities Limited noted that, “In line with our expectations, the local bourse kicked off the year on an impressive note and able to sustain it till the end of the half of the year.”
It noted that “While emerging (EM) and Frontier (FM) markets have been rattled by the impact of policy normalisation and inflationary pressures occasioned by the Russia-Ukraine conflict, the performance of the Nigerian financial market has been relatively strong. At the same time, the volatility in the FI market has also been uncharacteristically muted.
“Specifically, the NGX ASI settled at 51,705.61 points on June 24, 2022, although the index reached as high as 54,085.30 points, representing the highest level in 14 years. This led to a market return of +26.6 per cent during the same period, which was the highest in the world at that point.
Cordros explained that the reasons for the equities market resilience are rooted in the exodus from the market due to FX liquidity issues.
According to the research firm, this situation also limited inflows from investors and resulted in the market being dominated by domestic investors and foreign investors’ inability to repatriate funds, leading to the re-investment of dividends in the market.
“To buttress these points, domestic investors accounted for an average of 86.6 per cent of all transactions in five months of 2022, while the market performance in Q2, 2022 was 10.1 per cent.”
It pointed out that the factors that have led to resilient market performance in the year so far will sustain the market in the second half of the year.
On market outlook in H2, Cordros expected market performance to be far more resilient than in other pre-election years when market performance was pressured as investors’ consternation rose.
“This prognosis is based on the market being dominated by domestic investors and expectation that corporate earnings will remain resilient despite external concerns around global growth and internal concerns around spiralling inflation and the attendant impact on costs. Considering all the issues, our baseline expectation is that the market will remain resilient in H2, 2022, and the return will settle at +27.0 per cent by 2022 full year.
The vice president, Highcap Securities Limited, David Adonri said the H1 2022 performance is heartwarming to learn that the Nigerian Stock Market has outperformed all other African Markets in the first half of the year.
According to him, the NGX ASI surged at the beginning of the second quarter due to the impressive 2021 full year and 1st quarter 2022 results.
He attributed the growth to the rising crude oil price also enhanced performance of equities. He added that the market slowed down in June due to unfavorable domestic factors which the rising crude oil market could not offset.
“These were the rising inflation rate, hike in interest rate and excruciating energy crisis. As the political risk associated with the 2023 general election heightens and possibility of further hike in interest rate looms, economic fundamentals may not be strong enough to engender further market growth in H2 2022,” he said.
Also, the managing director, ARM Securities Limited, Mr. Rotimi Olubi, said: “we continue to see improved participation by local investors in the market which is boosting the performance of the ASI as foreign investors maintain the sidelines.
“Strong earnings from some stocks in the consumer goods and industrial goods as well as some banks also buoyed investor sentiment.”
Analyst at PAC Holdings, Mr. Wole Adeyeye noted that most listed stocks reported impressive financial reports for full year 2021 and declared dividend in the first half of 2022. Thus, investors positioned themselves for dividend payment during the period. In addition, investors patronised the equities market as yields in the fixed income market were not encouraging, especially in the first quarter of 2022.
