Equities defy earnings, dividend declarations as investors lose N1.2 trillion

The Nigerian Exchange Limited (NGX) defied full year 2023 earnings and half year (H1), 2024 interim dividend declarations by listed firms as investors lose N1.2 trillion in one week over increased patronage of government bonds and other fixed income instruments.

Market capitalisation, which stood at N56, 945 trillion as of Monday, July 22, 2024, closed at N55, 716 trillion yesterday, representing a loss of N1, 229 trillion or 2.2 per cent. Also, the All Share Index, which measures the performance of listed equities dipped by 2,436 points or 2.5 per cent from 100,568 points to 98,132 points.

Due to rising domestic inflation and the need to rebuild reserves, amid weak oil prices, the Central Bank of Nigeria (CBN) had continued to maintain a restrictive monetary policy, raising interest rate for four consecutive times within eight months. This has resulted to a shift in investor preferences towards higher-yielding and long-term FGN bond since the beginning of the year.

However, the recent hike in Monetary Policy Rate (MPR) to 26.75 per cent from 26.25 per cent spurred renewed bargain hunting in fixed instruments, causing bond prices in all maturities to appreciate, compared to stocks.

At the close of transactions yesterday, the total volume of trades declined by 65.3 per cent to 379.13 million units, valued at NGN8.71 billion, and exchanged in 10,096 deals.

On sectoral chart yesterday, the banking and Consumer Goods indices posted losses with -1.0 per cent-0.1 per cent, while the Oil & Gas and Insurance indices posted gains. 1.3 per cent and 0.2 per cent. The Industrial Goods index closed flat.

As measured by market breadth, market sentiment was mixed (1.0x), as an equal number of ticker (21) gained and lost. Caverton (-10.0 per cent) and Wapic (-9.3 per cent) recorded the highest losses of the day, while African Prudential (+10.0 per cent) and Cutix (+9.9 per cent) topped the gainers’ list.

A breakdown of dividend declared by quoted companies showed that United Capital recommended 90 kobo interim dividend and a bonus of issue of two new shares for every one held while Transcorp power paid N1.50 kobo.

Transcorp Hotel and Custodian investment paid 10 kobo and 15 kobo dividend to shareholders. African Prudential paid 15 kobo and a bonus of one for every one share held. Okomu Oil also increased shareholders’ value with N8 dividend payout.

Analysts at Cowry Asset Management said the bearish trend i s expected to persist as market players continue to digest the outcome of the recently published economic data and the interest rate hike by the apex bank.

Further, they added that the continued rise in yield levels within the fixed income and money market spaces is likely to maintain the unattractiveness of equities, as investors opt for the appealing yields

“Nonetheless, a mildly positive performance is anticipated on the back of continued earnings releases and attractive dividend declarations by corporations in the coming week

“As the market structure and fundamentals evolve, investors are advised to position themselves in stocks with sound fundamentals to navigate the prevailing conditions effectively.”

Codros Capital said while the recent decision of the MPC may further suppress investors’ sentiments in the near term, the ongoing H1-24 earnings season will ultimately guide market’s direction over the short-term.

Also last week, increased sell pressures in Dangote cement (-10.0 per cent), United Bank for Africa (-7.9 per cent), FBNH (-4.8 per cent) and Dangote Sugar (-7.3 per cent) triggered 2.3 per cent Week on Week (WoW) decline in the All-Share Index to 98,201.49 points, from preceding Friday’s 100,539.40 points while market capitalisation lost N1.32 trillion from N56, 929 trillion to N55, 605 trillion.

Sectoral performance also mirrored the overall bearish sentiment last week with the banking, consumer goods, oil&gas, and industrial goods sectors posted losses of 0.33.per cent, 0.14 per cent, 0.54 per cent, and 5.90 per cent while the insurance sector emerges the sole gainer, rising by 0.32 per cent.