Equity trading on the Nigerian Exchange Limited (NGX) finished the second month of the year (February) in green territory as the NGX All-Share Index appreciated by 4.8% to close the final trading day of the month with 55,806.26 index points.
Despite Nigeria’s rising inflation rate, interest rate hike, naira redesign, and election jitters which were expected to dampen the market confidence, investors increased their buying pressures on the expectation of impressive full-year 2022 corporate earning results.
Market performance: Available statistics to the Nairametrics showed that the All-Share Index, which is the broad index that measures the performance of Nigerian stocks opened the trading month at 53,238.67 index point at the beginning of trading on February 1, 2023, and closed at 55.806.26 points at the end February, gaining 2,567.59 basis points or 4.8%.
Further analysis revealed that activities on the Nigerian Exchange Limited (NGX), which opened the trading year at N28.997 trillion in market capitalisation, closed the month at N30.400 trillion, thus earning a month-to-date gain of N1.403 trillion or 4.8%.
Market analysts believed the renewed sentiment in the local bourse market had also grown following the craving to increase capital gains on the back of low prices of stocks, owing to an upset in the financial market arising from unstable policies.
Experts’ reactions: The Managing Director of Crane Securities Limited, Mr Mike Eze, told Nairmetrics that the price adjustment mechanism which the market is currently experiencing will continue during the first quarter of 2023 and that will make the market attractive.
He noted that most results particularly the banking results would come in the first quarter and investors interested in dividends will swoop on the stocks.
He added that it is likely that investors will take a position to reap the dividend these companies will declare during the quarter.
Mr David Adonri, the Executive Vice Chairman of Hicap Securities Limited, also told Nairametrics said that investors are in the earning season and that what investors will get from dividends is one of the factors that is driving the demand for shares in the market.
He noted that the equities market is defying current political uncertainties because investors are futuristic that the prospect for a yield environment is bright.
- “We are in the earning season when the market normally sustains positive sentiment, but this season is within the period of an election. I think the craving for dividends is overshadowing what would have been the impact of the elections,” he said.
Fundamental shift: The Managing Director of Arthur Steven Asset Management Limited, Mr Olatunde Amolegbe, said that a Demographic shift has happened in the NGX in the last few years.
- “We now have more local institutions and retail investors in the market than foreign portfolio investors. The reverse used to be the case, this shift has naturally reduced volatility in stock prices as the locals are likely to have more faith in the local market than foreigners. That’s why you see the NGX ASI continuing to rise despite all the uncertainties in the environment. My prognosis is that while we might see a slowdown as we move closer to the elections we are unlikely to see a significant decline in stock prices mainly because of what I have highlighted. However, if the election were to degenerate into chaos then the scenario might change significantly,” he said.
Full-year results expectation: Analysts at Cordros Securities Limited said that they expect investors to position for 2022 full-year results ahead of upbeat corporate earnings and re-investment of dividends to drive bullish sentiments in Q1, 2023.
- “Nevertheless, in the latter part of the year, we believe that market sentiments will be shaped by a combination of the outcome of the 2023 elections, market-friendly policy or reforms, the direction of monetary policy, and impact on fixed income yields, sector-specific events and the weak macroeconomic environment,” they said.