Equities trading on the Nigerian Exchange Limited (NGX) closed the month of October on a positive note as investors’ confidence was bolstered toward listed corporates following favourable policies and earning season.
Additionally, the listing of 190 million units of shares of the Group at N244.88 per share which added N46.527 billion to the market capitalization of NGX, further boosted liquidity in the Nigerian capital market and provided opportunities for wealth creation.
The NGX All-Share Index appreciated by 4.3% to close the month of October at 69,236.19 index points, recording a YTD return of 35.09% growth.
Despite concerns such as rising inflation, interest rate hikes, elevated exchange rates, and apprehension surrounding the fallout of the 2023 general elections, investor confidence remained strong, leading to increased buying activity.
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.
Market performance
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 66.382.14 index points at the beginning of trading on October 3, 2023, and closed at 69,236.19 points at the end the month on October 31, gaining 2,854.05 basis points or 4.3%.
Further analysis revealed that activities on the Nigerian Exchange Limited (NGX) which opened the trading year at N36.331 trillion in market capitalization at the beginning of trading, closed the month at N38.038 trillion, hence has earned a month-to-date gain of about N1.707 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.
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.
- He explained that the other driver might also be the fact that we are moving toward the end of the first half of the year, and this normally leads to portfolio rebalancing by fund and asset managers,
- “They rebalance their portfolio every quarter and every half year and this normally results in the stock rally,” he said.
