By Taofik Salako, Deputy Group Business Editor
Nigerian investors rallied about N334 billion in net capital gains last month as expectations of corporate earnings for the first half spurred intense bargain-hunting for value stocks.
Benchmark indices for the Nigerian equities market at the weekend showed average return of 1.69 per cent for the immediate past month, equivalent to net capital gain of N333.94 billion. The July rally pared the negative average year-to-date return from six-month loss of N1.24 trillion to N901.24 billion for the seven-month period ended July 31, 2021.
The benchmark All Share Index (ASI) of the Nigerian Exchange (NGX) Limited closed weekend at 38, 547.08 points as against 37,907.28 points recorded as the losing index for June and opening index for last month. The ASI is widely regarded as Nigeria’s sovereign equity index, a barometer for measuring pricing trend and investors’ mood at the stock market.
Aggregate market value of all quoted equities at the NGX improved fro the opening value of N19.760 trillion to close weekend at N20.084 trillion, representing an increase of 1.64 per cent or N324 billion. The difference between the ASI and market value was due mainly to unadjusted impact of changes in shareholdings rather than secondary price movement.
Average year-to-date return for the seven-month period, however, remained negative at -4.28 per cent, although an improvement on average negative return of -5.869 per cent recorded for the six-month period ended June 2021. The ASI had opened the year at 40,270.72 points while aggregate market value of quoted equities stood at N21.057 trillion at the beginning of the year.
Sectoral analysis of pricing trend showed a positive outlook with the exception of insurance and consumer goods sectors, which played negative contrarian. Investors in oil and gas stocks led the rally with the NGX Oil and Gas Index rallying a return of 2040 per cent in July. The influential NGX Industrial Goods Index and NGX Banking Index posted average gain of 4.64 per cent and 4.06 per cent. Nigeria’s largest capitalised quoted company is listed under the industrial goods sector while banking stocks are the most active and sensitive stocks. The NGX Lotus Islamic Index- which tracks the emerging alternative Islamic finance market, rose by 2.10 per cent while the NGX 30 Index, which tracks the 30 largest quoted companies posted average gain of 2.78 per cent. However; the NGX Insurance Index and NGX Consumer Goods Index declined by 2.98 per cent and 0.54 per cent.
Most analysts attributed the rally to the onset of the first half earnings season, during which most quoted companies submitted their half year results. Under the rules at the stock market, quoted companies are required to submit their quarterly results not later than 30 days after the end of the quarter.
Analysts expected released earnings to continue to influence market performance in the weeks ahead.
“We believe investors will digest the flurry of earnings released this week to gauge the extent of improvement in company’s fundamentals given the tepid recovery in macroeconomic conditions. As a result, we expect portfolio rebalancing activities into cyclical stocks and positioning in dividend-paying stocks to shape market performance in the week ahead,” analysts at Cordros Securities stated at the weekend.
Analysts, however, noted that other developments in the macroeconomic landscape will also shape the direction of the market.
“In the coming week, we expect bargain hunting activities to dominate on the back of relative price attractiveness of stocks and release of favourable first half 2021 earnings results,” Afrinvest Securities stated.
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