Equities trading on the Nigerian Exchange Limited (NGX) closed the month of August on a positive note as investors’ confidence was bolstered toward listed corporates following favourable policies and earning season.
The NGX All-Share Index appreciated by 3.44% to close the month of August at 66,548.99 index points, recording a YTD return of 29.85% growth.
Despite concerns such as rising inflation, interest rate hikes, and apprehension surrounding the fallout of the 2023 general elections, investor confidence remained strong, leading to increased buying activity.
Nigeria’s main shares index on Tuesday 29th August, marked a historic milestone and hit a 15-year high as investors continued to cheer Bola Ahmed Tinubu’s inauguration speech as Nigeria’s 16th president
The All-Share Index (ASI) of Nigerian Exchange Limited (NGX) had risen by 0.51% to 66,490.34 points from 66,151.38 the previous day, surpassing the highest value of 66,371.20 recorded on the Exchange on March 5, 2008.
The positive sentiment among investors can be attributed to several factors, including favourable policies introduced by President Bola Tinubu’s new administration such as the removal of fuel subsidies, streamlining of exchange rates, the floating of the naira and investors strategically positioned themselves and taking advantage of the recent record earnings posted by quoted firms.
This renewed enthusiasm was remarkable following an increase in local investor participation in the equity market, which, according to Nairametrics, rose by an impressive 72% in July alone.
Available statistics to the Nairametrics showed that the All-Share Index, which is the broad index that measures the performance of Nigerian stocks, opened the trading month at 64,337.52 index points at the beginning of trading on August 3, 2023, and closed at 66,548.99 points at the end the month on August 31, gaining 2,211.47 basis points or 3.44%.
Further analysis revealed that activities on the Nigerian Exchange Limited (NGX) which opened the trading year at N35.011 trillion in market capitalization at the beginning of trading, closed the month at N36.422 trillion, hence has earned a month-to-date gain of about N1.411 trillion.
What the market analysts are saying
Mr. David Adonri, Executive Vice Chairman, of Hicap Securities Limited in a chat with Nairametrics said that investors were in the earning season and that what investors will get from dividends is one of the factors that drove the demand for shares in the market during the half year.
He noted that the equities market is defying current political uncertainties because investors are futuristic that the prospect for a yield environment is bright.
“Most companies, especially banks, released their half-year results during the quarter. The market normally sustains positive sentiment during the earning season.
However, the season was within the period when election cases are still being determined in the courts, but I think the craving for dividends overshadowed what would have been the impact of the elections,” he said.
Analysts at the United Capital in their H1 2023 review and H2 2023 outlook report said that keeping in view that two key factors which have kept the development of the real sector suppressed (elevated interest rate and foreign exchange losses), they expect the new policies of the new administration particularly the “Unification of the exchange rate”, and “Advocacy for a Lower Interest rate Environment” to stand as a significant upside for the earnings performance of listed Nigerian corporates, which will bolster investors’ confidence toward listed corporates, particularly in earning seasons (H1-2023, and Q3-2023 earnings season).
“Overall, we anticipate a broadly favourable market for the Equities Market in H2-2023, supported by the above expectations. For the fixed-income market, we believe the new administration’s objective to dampen the interest rates environment will continue to provide enough incentive for the CBN to leave the financial system mostly liquid, in a bid to stimulate activities in the real sector.
The MPR and improved foreign participation are two strong factors to determine the trend of yields from the mid-long end of the curve.
That said, we forecast that the equities market will be the most favourable market segment for both foreign and local investors.
A strong incentive will be the cheaper Naira, removal of multiple taxations, and easy repatriation of FX by foreign investors,” they said.
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