Funds inflows from the fixed income market as well as the gradual rise in crude oil prices in the global market ensured that equities investors on the Nigerian Exchange (NGX) Limited witnessed N982 trillion investment profit in the month of October.
Some investors had earlier liquidated their investment in the fixed income market as a result of low yield and low interest rates and had to divest this fund into the nation’s capital market, hence, pushing the market to profit last month.
The month of October, which is the earnings’ reporting season, mostly of third-quarter (Q3) results, closed on a positive note, with the basic indicators recording their highest monthly gain since February 2021.
Specifically, the composite NGX All-Share index gained 1,817.43 basis points or 4.52 per cent to close at 42,038.60 points on October 29, 2021, from 40,221.17 points at which it opened for the month.
Similarly, market capitalisation appreciated by N982 billion to close the month of October at N21.938 trillion from N20.956 trillion at which it opened for the month.
On the sectoral indices, the NGX’s Banking index recorded the highest gain during the month with 10.66 per cent. NGX Oil & Gas index followed with a gain of 6.43 per cent while NGX Pension index appreciated by 6.16 per cent.
NGX 30 index rose by 4.34 per cent; the NGX Industrial Goods index was up by 4.21 per cent while NGX Insurance index appreciated by 3.98 per cent. NGX Premium, Lotus II and Consumer Goods indices recorded a monthly gain of 2.85 per cent, 1.17 per cent and 0.41 per cent respectively for the month of October 2021.
Capital market analysts attributed the positive performance to positive buying interests, the better-than-expected corporate earnings and inflow of funds searching for higher returns amidst the relatively low-interest rates, inflationary environment and the unclear direction of yields in the fixed income market.
The chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion, said that the uptrend seen in the composite NGX All-Share index and the positive corporate earnings of listed companies released so far showed that the Nigerian economy is still on the path of growth, adding that this is a reflection of the monetary policy stance driving economic activities again through relatively low-interest rates.
“There was also the impact of the recovery in oil prices at the international market in the midst of a slower economic recovery driven by vaccination and positive buying sentiment among blue-chip and growth stocks.
“These triggered buying interests in the equity space that had been sustained for over four consecutive months of bull-run, as the monthly NGX index action formed a saucer chart pattern that supports an uptrend and market recovery on a higher traded volume and positive breadth,” Omorodion explained.
He added that “the positive close on bullish sentiments in the market was also despite the growing insecurity challenges across the country, crisis in the foreign exchange market and continued rise in external reserves.
“We do know that stock markets across the globe, as leading indicators of economic activities, are forward-looking. Consequently, it is not unexpected that the current share prices are reflecting the future earnings potential of quoted companies or their profitability, which is directly linked to economic activities and eventually the GDP.”
The managing director, Afrinvest Research & Consulting, Mr. Abiodun Keripe, expressed optimism in the last quarter of 2021 equities market performance based on improvement in the macro-economic environment and pick up in business activities expected to support the equities market.
He noted that the sentiment in the equities market remained strong in the last quarter of result as it has been dominated by local investors.
Similarly, the managing director, Highcap Securities Limited, Mr. David Adnori, attributed stock market gain in October to impressive listed companies’ nine months corporate earnings and improved macroeconomic conditions.
According to him, the rising price of crude oil also increased demand for stocks on the NGX. The growth may extend to year end as most Q3 results are fantastic and the steady increase in global oil prices.
He however said: “The recovery of the stock market could have been better but insecurity in the nation led to hike in inflation rate and investors had to react negatively.”
Analyst at PAC Holdings, Mr. Wole Adeyeye, noted that “most investors took advantage of undervalued stocks in the equities market. Also, some investors increased the equity portion of their portfolios, especially in the second half of 2021 due to relatively lower yields in the fixed income market.”
He expressed optimism about the equities market sustained growth in the remaining two months of 2021, stressing that, “in the remaining two months of 2021, our outlook remains bullish as we expect most investors to start positioning for dividend payment of full year 2021.”