Last week, the all-share index (ASI) rose by 0.7 per cent on a week-on-week basis to close at 105,660.64 points, driven primarily by strong corporate earnings from the banking sector, increased institutional participation, and quarter-end portfolio rebalancing.
Investor confidence surged as major banks released their audited 2024 full-year earnings, revealing impressive performances and attractive dividend declarations.
For instance, United Bank for Africa’s (UBA) profit after tax soared by 14 per cent to close the year at N766.6 billion, up from N607.7 billion recorded at the end of the 2023 fiscal year while its gross earnings also grew significantly from N2.08 trillion recorded at the end of the 2023 financial year to N3.19 trillion in the period under consideration, representing a 53.6 per cent growth.
Based on the improved performance, the bank proposed a final dividend of N3 for every ordinary share of 50 kobo for the financial year-ended December 31, 2024, bringing the total dividend in the year to N5.
This triggered renewed buying interest in banking stocks, lifting the overall market sentiment. As a result, the total market capitalisation rose to N66.26 trillion, while the ASI’s year-to-date (YTD) return improved to 2.7 per cent, reflecting renewed optimism among investors.
Market participation was robust, with 43 stocks advancing against 36 decliners, resulting in a positive market breadth of 1.19 times. Trading activity also recorded a sharp uptick, with the total number of deals rising by 7.5 per cent week-on-week to 61,309 transactions.
The volume of shares traded skyrocketed by 159.2 per cent to 7.52 billion units while the total value of traded equities soared by a staggering 730 per cent to N398.95 billion.
This increase was largely attributed to heightened institutional repositioning ahead of dividend payouts. Sectoral performance reflected a predominantly bullish trend, with four of the six major indices closing in positive territory.
The NGX banking index led the pack, posting a 4.3 per cent week-on-week gain as investors accumulated banking stocks such as GTCO, FCMB, Fidelity Bank, and FirstHoldco, which had delivered strong financial results.
The NGX Insurance Index followed closely, rising by 3.21 per cent, while the NGX consumer goods and NGX industrial indices edged up by 0.12 per cent and 0.01 per cent, respectively, driven by gains in stocks such as Mutual Benefit, Sunu Assurance, Champion, Ikeja Hotel, and UPDC.
However, the NGX oil and gas index declined by 1.6 per cent as sell-off in Eterna, Oando, and Aradel dragged the sector down amid cautious trading driven by fluctuating global oil prices.
The market’s resurgence highlights renewed investor confidence, particularly in the banking sector, as earnings season drives optimism.
However, concerns remain in specific sectors, particularly oil and gas, where external factors such as global price fluctuations continue to influence market direction.
Overall, while the market’s upward trajectory is expected to continue, analysts urge caution, highlighting the potential for short-term fluctuations amid shifting investor sentiment.
The analysts anticipated that the current bullish momentum will persist as the earnings season unfolds, with dividend announcements expected to keep investor interest high in blue-chip stocks.
However, they caution that volatility may arise due to portfolio rebalancing and profit-taking activities as investors digest corporate earnings reports and macroeconomic data.
According to analysts at Cowry Asset Management, the influx of full-year earnings results will continue to drive positive sentiment, particularly in fundamentally strong stocks with consistent earnings growth and resilient business models.
They advised investors to prioritise such stocks to ensure sustainable long-term value creation. Similarly, Codros Capital foresee a mixed trading pattern in the coming holiday-shortened week. While they anticipate profit-taking in recently rallied stocks, they also expect renewed bargain-hunting in undervalued stocks that have lagged.
They noted that this dynamic could lead to choppy market movements as investors strategically position themselves based on earnings reports and broader economic indicators.
As the market heads into the new quarter, investors will be closely watching economic indicators, corporate earnings, and regulatory developments to gauge the sustainability of the current bullish momentum.
