Following improved corporate earnings by companies, low yield in fixed income market, among other factors, the stock market segment of the Nigerian Exchange Group (NGX) added N5.64 trillion in the first half (H1) of 2022.
Precisely, the market capitalisation in H1 2022 appreciated by N5.64 trillion or 25.3 per cent to close at the end of the first half of 2022 at N27.935trillion, from the N22.297 trillion it opened for trading activities on January 4, 2021.
Consequently, the overall market performance, the NGX All-Share Index (ASI), which tracks the general market movement of all listed companies on the Exchange, rose by 21.31 per cent or 9,101.15 basis points to close at 51,817.59 basis points in H1 2022, the highest performance in 14 years, from 42,716.44 basis points it opened for trading.
The stock market in H1 2022 maintained positive momentum with domestic investors raising their stake amid rising inflationary pressure and the challenging business environment.
Data gathered by THISDAY revealed that, sectors performance on the NGX was mixed on the backdrop of investors’ sentiment.
For instance, with the rise in global oil prices, the NGX Oil & Gas Index outperformed other indices on the bourse, gaining 58.06 per cent to 545.34 basis points in H1 from 345.01 basis points it opened trading. It was closely followed by Industrial Index that rose by 7.7 per cent to 2,152.24 basis points from 2,008.30 basis points it closed in 2021.
On the flipside, the NGX Banking Index suffered a decline of 2.04 per cent in H1 to 397.79 basis points as of June 30, 2022 from the 406.07 per cent it opened for trading, just as the NGX Insurance Index depreciated by 9.98 per cent to 178.33 basis points in H1 2022 from 198.11 basis points it opened for trading this year.
Stocks that contributed to growth in the market performance included Seplat Energy Plc that appreciated by N650 per share from December 31, 2021 to N1,300 per share as of June 30, 2022, while Airtel Africa gained 81.4 per cent to N1,732.20 per share from N955 per share it opened for trading.
Airtel Africa in the first H1 2022 appreciated by N2.9 trillion in terms of market capitalisation to contribute about 23.3 per cent or N6.91trillion to overall market capitalisation of listed stocks on the NGX.
Others were: MTN Nigeria with a 17 per cent increase in stock price to N230 per share from the N197 per share it closed in 2021, while Dangote Cement gained seven per cent in stock price to close at N275 per share from N257 per share.
The stock market in the first quarter of 2022 had gained N3.02 trillion on the backdrop of impressive corporate earnings by major listed companies that led to robust dividend pay-out to shareholders.
Also, the overall market performance, the NGX ASI had risen by 9.95 per cent to close at 46,965.48 basis points in the first Q1 2022.
Capital market analysts said H1 2022 was positive for the domestic market and urged investors to trade the stock market with caution over political uncertainty.
Analysts at Cordros Securities, in a report titled, “Heightened uncertainties amid great policy unwind,” noted that while emerging (EM) and Frontier (FM) markets had been rattled by the impact of policy normalisation and inflationary pressures occasioned by the Russia-Ukraine conflict, the performance of the Nigerian financial market was relatively strong, stressing that the volatility in the Fixed Income (FI) market has also been uncharacteristically muted.
The report stated the fixed income market return settled at +eight per cent, which was below the return in the prior year (H1-21: 10.1per cent), but was a stark difference from the market performances in peer countries, where investors significantly reduced exposure to risk assets as central banks across the globe raised benchmark interest rates in response to spiralling inflation.
They attributed the growth in stock market performance to resilience rooted in the exodus from the market due to Foreign Exchange (FX) liquidity issues.
According to the report, “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 86.6per cent of all transactions in five months of 2022, while the market performance in Q2-22 was 10.1per cent (Q1-22: 10per cent; H1 2022: 21.per cent.”
Analyst at PAC Holdings, Mr. Wole Adeyeye attributed the stock market performance to impressive financial reports for full year 2021 and dividend pay out to shareholders in the first half of 2022 by listed companies.
He added that, “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.”
Going forward, he said, “Bears may dominate equities market in the second half of 2022 due to the expectation of improved yields in fixed-income market, upcoming elections and uncertainties surrounding the economy.”
The Vice president, Highcap Securities Limited, Mr, David Adonri said, “NGX ASI surged at the beginning of the second quarter due to the impressive 2021 full year and Q1 2022 results.
“The rising crude oil price also enhanced the performance of equities. However, the market slowed down in June due to unfavorable domestic factors which the rising crude oil market could not off set.
“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.”
Speaking with THISDAY the Managing Director, ARM Securities Ltd, Mr. Rotimi Olubi, also 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 side-lines.
“Strong earnings from some stocks in the consumer goods and industrial goods as well as some banks also buoyed investor sentiment.”
Kayode Tokede
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