Investors gain N2.54tr in Q1 as market damns political risks

Despite the tense political environment and lingering macroeconomic challenges, the Nigerian equities market consolidated gains made in the previous year, as investors’ wealth rose by N2.54 trillion in the first quarter.

The all-share index (ASI) of Nigerian Exchange Limited (NGX) rose from 51,251.06 points to 54,232.54, returning 5.81 per cent gain.

Similarly, the market capitalisation of listed equities closed higher at N2.54 trillion to N29.54 trillion.

Besides, NGX recorded N318.5 billion listings in the first quarter of the year across its asset classes as revealed by the exchange’s X-compliance report.

The top three performing stocks were Geregu, BUAFoods and Oando, increasing by 116.8 per cent, 56.9 per cent and 45.4 per cent while the top losers were Nigerian Breweries, Airtel Africa and Ardova shedding 9.8 per cent, 9.5 per cent and 7.3 per cent.

Performances across the NGX sub-indices were positive as the NGX Consumer Goods recorded 19.15 per cent sub-index leading the gainers.

NGX Oil/Gas followed with 10.45 per cent appreciation. NGX Banking returned 8.5 per cent, NGX Pension 6.35 per cent, NGX-30 6.24 per cent, NGX Industrial Goods 6.05 per cent and NGX Insurance 1.81 per cent sub-indices.

Analysts attributed the Q1 upturn to the dominance of local institutional investors which has helped to reduce the dependence on foreign investors and prevent unnecessary shocks.

They noted that the local investors have dominated the market with increased buying interest due to anticipations of robust earnings and dividend payout for the 2022 financial year.

According to them, part of the reason for the depressed state of the market over the years was due to sell down by foreign investors that play a dominant role in the nation’s bourse.

Managing Director of HighCap Securities Limited, David Adonri, said the equities market defied current political uncertainties because investors are repositioning ahead of 2022 full-year earnings and dividend payout in optimism that the prospect for the equities market is bright.

“The first quarter of 2023 was assaulted by tense sociopolitical events, deteriorating economic situation and CBN imposed cash scarcity.

“Despite the challenge, equities showed remarkable resilience by closing positively. However, the turnover of stocks traded for the quarter was abysmally low.

“The positive performance of the equities market was primarily due to the impact of full-year corporate results and distribution to shareholders,” he said.

Managing Director, Arthur Steven Asset Management Limited, Olatunde Amolegbe, linked the improved performance to a demographic shift that caused a dominance of local institutions and retail investors in the market over 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 foreigers. That is why you see the NGX ASI continuing to rise despite all the uncertainties in the environment.

Vetiva Dealings and Brokerage said: “As at February 28, the market had returned 8.89 per cent, hence the profit-taking activities seen in March. Also, in the absence of a positive catalyst to drive buy-interest, March ended with a 1.70 per cent decline.

“With the anticipation of another full year 2022 results, we expect this to positively drive the market in the short-term.”

Codros capital said: “With the moderation in the prices of bellwether stocks, we expect investors to take advantage of this and make a re-entry.

“However, this will be dependent on positive financial results releases. In the near term, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed-income space.

“Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”