Equity trading on the floor of the Nigerian Exchange Limited (NGX) recorded a gain of N5.639 trillion during the half-year ended June 30, 2022, as investors continue to increase their buying pressure, especially on blue-chip stocks.
Positive sentiments had returned to the local bourse as the release of full-year 2021 and Q1’22 corporate earnings bolstered buying interests in dividend-paying stocks.
Capital market analysts attributed the growth of the NGX to a steady increase in global oil prices and listed companies’ impressive earnings post-COVID-19.
Available statistics to Nairametrics showed that activities on the Nigerian Exchange Limited (NGX) which opened the trading year at N22.296 trillion in market capitalisation and 42,716.14 in index at the beginning of trading on January 4, 2022, closed the half-year on 30th June 2022 at N27.935 trillion and 51.817.59 index points. This has earned a year-to-date gain of about N5.639.25 trillion or a 21.31% increase in index points year to date.
Market analysts believe 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 upset in the financial market arising from the widespread of the pandemic and sharp drop in oil price.
The listing of BUA Foods’ shares also added N720 billion to the market capitalization of NGX during the first month of the year, further boosting liquidity in the Nigerian capital market and providing opportunities for wealth creation.
What experts are saying
The Managing Director, Crane Securities linked the rally to low yield in the money market instruments and liquidity overhang that makes it practically difficult for investors in the fixed income sector to factor in current high inflation rate.
- “The current negative return in the fixed income market is forcing investors to embrace the equities market as an alternative investment class, which is known to readily adjust to inflation from time to time.
- Pension Fund Administrators (PFAs) and other investment companies that pitched their tent in the fixed income market due to lull in equities have currently increased their stake in the stock market to ensure guaranteed investment return and capital appreciation.
- “We saw more investors deploying their dividends payout into equities currently. Also, the availability of derivative instruments that now serve as perfect means of hedging against volatility and other risks in the equity market. This is capable of attracting liquidity to the equity market.
- “More institutional investors, particularly pension funds and asset management companies, are likely to embrace equity market as a result, and we are beginning to see that in the market,” he said.
Vice President of Highcap Securities Limited, David Adonri, attributed the growth to high crude oil price and generally impressive first-quarter results released so far by listed firms.
He said the market has been in a downturn for a while and this presented opportunities for bargain-hunting, which boosted demand for several stocks considered undervalued.
However, he noted that the rally would lose steam due to increasing socio-political risk, recession in industrialised economies and mounting insecurity.
- “The continued rally on equities is due to impressive Q1 results and other positive price-sensitive disclosures concerning some high cap stocks.
- “Favourable crude oil price is also a propelling factor. When political tension attendant to 2023 election starts mounting coupled with economic slowdown in industrialised economies, market correction will set in,” he said.
