Equities trading on the Nigerian Exchange Limited (NGX) concluded the first quarter of 2024 (January-March) with notable positivity, propelled by a notable surge in investor confidence directed towards listed corporations.
This exceptional performance stands as a milestone in NGX’s history, defying prevailing economic challenges such as elevated inflation, a depreciating exchange rate, and persistent security concerns.
The prevailing optimism manifested in discernible shifts in purchasing behavior, culminating in the All-Share Index reaching a noteworthy close at 104,562.06 index points by the end of the quarter.
Moreover, the year-to-date (YTD) return of the NGX All-Share Index shows its resilience, standing at an impressive 39.84%.
Despite the backdrop of escalating inflation, prospective interest rate adjustments, and volatile exchange rates, investor confidence has displayed remarkable steadfastness. This unwavering assurance has, in turn, spurred heightened market activity and intensified buying engagements.
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All-Share Index crosses 100,000 points for the first time
Equity trading on the Nigerian Exchange Limited (NGX) had closed trading on Wednesday, January 24th, 2024, in the green territory as the NGX All-Share Index appreciated by 3% to cross 100,000 index points hitting 101,571.11 points.
The development was unprecedented in the history of the Exchange being the first time the Exchange will achieve the feat.
According to Nairametrics report, before crossing the 100,000 points, NGX had secured its position as the world’s best-performing stock market in the first three weeks of 2024, capping off the trading day on January 19, 2024, at an impressive 94,538.12 points.
With a remarkable year-to-date return of 26.43%, the NGX has outshone its global counterparts.
Taking the second spot is the S&P Merval Index, reflecting the performance of the Argentine Stock Exchange (BYMA), with a year-to-date return of 26.37%.
Setback on February with N650 billion loss
However, investors in the Nigerian equities market faced a setback on February leading to an estimated loss of approximately N650 billion as the domestic bourse grappled with significant selling pressure following profit takings.
Resultantly, the local bourse experienced a decline of 1.16%, culminating in the benchmark index settling at 99,980.30 points.
Notably, the NGX All-Share Index dropped below the 100,000 points thresholds for the first time in over a month, concluding the day at 99,302.57 points.
This decline contrasted sharply with its peak position of 105,722.78 points recorded on Friday, February 16th.
The listing of Transcorp Power Plc
The market regained its momentum in March, propelled by the listing of Transcorp Power Plc, a subsidiary of Transcorp Plc on the NGX.
The company listed 7.5 billion shares at N240.00 per share by introduction on the Main Board of the Nigerian Exchange (NGX).
The leading power generation company’s listing boosted the overall NGX market capitalization by N1.8 trillion, just as its shares rose by 10% on the first trading day.
The market positive sentiment among investors is being attributed to several factors, including favourable policies introduced by President Bola Tinubu’s 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.
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Market performance
- Consequently, 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 first quarter at 74,773.77 index points at the beginning of trading on January 2, 2024, and closed at 104,562.06 points at the end the month on March 28, gaining 29,788.29 basis points or 39.84%.
- Further analysis revealed that activities on the Nigerian Exchange Limited (NGX) which opened the trading quarter at N40.917 trillion in market capitalization at the beginning of trading, closed the quarter at N59.120 trillion, hence has earned a month-to-date gain of about N18.203 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 period.
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.
The Managing Director, of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe in a chat with Nairametrics said that a Demographic shift has happened in the NGX in the last few years.
- “We now have more local institutions and retail investors in the market than 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 foreigners. That’s why you see the NGX ASI continuing to rise despite all the uncertainties in the environment.”
Amolegbe further said that the expectation that the policies will encourage the inflow of foreign investment is the primary trigger that is causing the stock market rally.
- “The second trigger will include the fact that some of these policies will lead to a short-term increase in inflation level and typically stock prices tend to rise along with inflation,” he said.
