Investors Rake In Massive Returns As Equities Gain N5.3trn In H1 Amid Policy Reform

Investors’ investment on the Nigerian stocks market grew by N5.095 trillion in the first half (H1) of the year amid monetary and foreign exchange reforms.

Since the beginning of the year, the equities market has witnessed an unprecedented rally and buying interest across sectors, especially in the financial services, consumer and industrial goods sub sector which has continued to trigger massive bargain hunting in large company shares, pushing the key performance indices and stimulating activities in the market, a development that has rated the nation’s stock market as best performing in Africa and third in the world.

Also, the peaceful transition of power and the new administration’s pro-market policy statements has continued to spur an unprecedented rally in the stock market.

The market capitalisation gained N5.095 trillion from N28.103 trillion at the beginning of the year to close at N33.198 trillion at the end of June 30, 2023. Similarly, the Nigerian Exchange (NGX) Limited All-Share Index (ASI) rose by 18.17 per cent from 51,595.66 points on December 30, 2022 to 60,968.27 points on June 30, 2023.

Market players have continued to digest the policy directions of the government on the economy and financial market, as well as sociopolitical reset is ongoing to put the nation on a progressive path. Also, the new government is following through its policy statement, even as the market awaits further guidelines, strategies and agenda to achieve all that were promised to a new hope.

Recently released report by the NGX on domestic and foreign portfolio participation in equities trading for the month of May 2023 showed that foreign portfolio investors have returned to the market as they raise their stake by huge 338.72 percent in May. Foreign investors raised their stake to N37.16 billion in May from N8.47 billion in April, representing a 338.72 percent increase.

The chief executive officer of Crane Securities Limited, Mike Ezeh said, the emergence of President Bola Tinubu further energised the market since market participants have hope in his ability to rejig the economy and implement economy friendly policies.

“The elections came and was hitch free against all unification of the multiple exchange rates, review of monetary and fiscal policies, shake up major changes carried out at the apex bank and its overflow down to the deposit money banks across the country brought stability to the market.

“The commissioning of the first indigenous private refinery which has cyclical effect on both upstream and downstream operations of petroleum companies quoted in the market propelled the interplay in the market by some high-net-worth investors on many quoted companies resulting in high turnover in trading volumes of those companies leading to the significant increase in market capitalisation within the period,” he said.

He urged the new government to continue to implement policies that would provide enabling environment for businesses to thrive, saying this would help boost nation’s Foreign Direct Investment (FDI) and attract issuers to the capital market.

Vice president of Highcap Securities, David Adonri said the monumental gain was driven majorly by sentiment arising from the smooth handover and Tinubu bold economic policy changes.

“His prompt change of security chiefs also boosted investors’ confidence. The removal of Godwin Emefiele as 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,” he added.

He further said: “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 fall in interest rate, otherwise, we might see a market correction that may purge equities off the sentiment that inflated it in H1, 2023.”

On market outlook, Cordros Securities Limited said: “considering that we have previously argued that the new administration’s stance and intent to resolve key policy issues, particularly around the current forex framework and oil subsidy payments will be key catalysts for a better-performing equities market, we view the new President’s speech as positive for the equities market.

“Particularly, we believe the President’s statements on resolving current issues around multiple exchange rates and rectification of the current FX repatriation sit well with investors, evidence of which is the positive showing at the end of the month’s session.”

Cordros however noted that policy reforms from the new administration have to be overarching to have a lasting impact on the local bourse over the long term.