Stock Market Investors Gain N875bn in 10 Months

The stock market has appreciated by N875 billion in the first 10 months of 2021, due to investors’ renewed interest in listed undervalued stocks and impressive nine months corporate earnings of listed companies on the Nigerian Exchange Limited (NGX).

According to findings by THISDAY, the market capitalisation of equities on the NGX appreciated by 4.2 per cent to close on October 29, 2021, at N21.938 trillion, up from the N21.063 trillion the market opened for trading this year.

On the other hand, the NGX All-Share Index also appreciated by 4.4 per cent or 1,767.88 basis points from the 40,270.72 basis points it opened at the beginning of 2021, to 42,038.60 basis points.

The equities market in 2021 has been confronted with foreign investors’ exit, double-digit inflation rate that discourage investment as well as movement of liquidity to money market instruments.

According to NGX’s domestic and foreign portfolio participation in equity trading, domestic investors as at September 2021 dominated transactions with 78.43 per cent year-to-date (YtD), while foreign investors recorded 21.57 per cent total transactions in the period under review.

Analysts noted that inflation rate at an average of 17.4 per cent between January and September of 2021 contributed to investors dumping the equities market for money market instruments.

The equities market in January started on a positive note having gained N8 trillion in 2020, by appreciating by N1.124 trillion in January 2021.

Capital market analysts had stated that January equities market performance was another great month in the history of the nation’s capital market, extending the sharp market recovery and bull ascendance, driven by positive sentiment, inflow of funds from the fixed income market, oscillating oil price, among other factors.

The positive sentiments that pervaded the stock market between January and February was cut short-lived over the anticipated reversal in the yields on fixed income (FI) instruments that weakened investors’ appetite for stocks in months that followed.

The market capitalisation also lost a total of N1.297 trillion in the first half (H1) of 2021 to N19.760 trillion as investors moved to fixed income instrument.

However, in the 10 months under review, the equities market indicators recorded mixed performance based on domestic and foreign macro economy conditions.

For instance, the National Insurance Commission (NAICOM) suspension of its insurance sector recapitalisation led to a decline in the NGX Insurance index by 5.06 per cent to close October at 197.92 basis points from 189.50 basis points it opened in 2021, while NGX Banking Index appreciated by 4.42per cent to 410.39 basis points from 393.02basis points it opened this year.

The NGX Consumer good index also dropped by 0.67 per cent basis points to 569.51 basis points, while the NGX Oil/Gas index leads all other market indices in 10 months to close at 72.81 per cent from 226.20 basis points it opened in 2021 to close October 29, 2021 at 390.90basis points.

A stockbroker and capital market analyst, Mr. Rotimi Fakayejo attributed the oil and gas index performance growth to impressive corporate earnings posted by listed petroleum marketing companies, stressing that the enactment of the Petroleum Industry Act also played a critical role in lifting the index higher in the 10 months under review.

On the other hand, NGX Industrial, Lotus II, and Premium indices recorded a year-to-date gain of 6.09 per cent, 3.26per cent, and 18.67 per cent respectively as at October 29, 2021.

In a chat with THISDAY, Managing Director, Highcap Securities Limited, Mr. David Adnori, attributed stock market gain in the first 10 months of 2021, to impressive listed companies’ nine months corporate earnings and improved macroeconomic conditions.

According to him: “The rising price of crude oil also increased demand for stocks on the NGX. The growth may extend to year end as most Q3 results are fantastic.
“The rebound in the stock market is expected to extend till year ended because of steady increase in global oil prices.

“The recovery of the stock market could have been better but insecurity in the nation’s led to hike in inflation rate and investors have to react negatively.”

Analyst at PAC Holdings, Mr. Wole Adeyeye, explained that: “Most investors took advantage of undervalued stocks in the stock market in the 10-month to October 2021.

“Also, some investors increased the equity portion of their portfolios, especially in the second half of 2021 due to relatively lower yields in the fixed income market.”

Analysts at Cordros Capital in a report, noted that, “despite the yield retracement in the first half, we do not think investors should give up on the possibility of a market rally in the second half of the year as we still see scope for positive market performance.”