•Scrambles for banks, oil shares • Steady corporate earnings to drive bulls
Investors in Nigerian equities closed weekend with a net capital gain of N1.61 trillion so far this year as increased bargain-hunting for quoted shares continued to drive up share prices at the stock market.
Benchmark indices at the Nigerian Exchange (NGX) at the weekend indicated average year-to-date return of 5.78 per cent, equivalent to net capital gain of N1.613 trillion so far this year. The continuing rally further accentuated the global top-chart performance of Nigerian equities, which had closed 2022 with full-year average return of 19.98 per cent, equivalent to net capital gain of N4.455 trillion.
Nigerian equities had broken their known cycle of decline in pre-election year to record their third consecutive positive performance in 2022. Nigerian equities had closed 2021 with average return of 6.07 per cent, equivalent to net capital gains of N1.278 trillion. In the throes of the outbreak of COVID-19 pandemic in 2020, Nigerian equities had recorded average return of 50.03 per cent, representing net capital gains of N6.483 trillion.
The All Share Index (ASI)- the common value-based index that tracks all share prices at the NGX, closed weekend at 54,213.09 points as against its year’s opening index of 51,251.06 points, representing an increase of 5.78 per cent. It had closed January 2023 at 53,238.67 points. The ASI had opened 2022 at 42,716.44 points.
Aggregate market value of all quoted equities also rose from the year’s opening value of N27.915 trillion to close weekend at N29.528 trillion, representing an increase of N1.613 trillion or 5.78 per cent. It had closed January 2023 at N28.998 trillion, representing net capital gain of N1.08 trillion for the first month of the year. Aggregate market value of quoted equities opened 2022 at N22.297 trillion.
The perfect correlation in the movement of the ASI and aggregate market value, at 5.78 per cent each, underlined that the increase in market value was entirely due to share price appreciation, rather than primary market activities such as listing of new company, increase in number of shares or primary revaluation of shares.
Most analysts expected Nigerian equities to sustain their rally despite the forthcoming general elections.
Analysts attributed the performance of quoted shares to the onset of the earnings season, with early filers showing steady improvements in corporate earnings.
Analysts at Afrinvest Securities said they expected the rally to continue as investors continue positioning for dividend-paying stocks.
“In the subsequent weeks, we expect the NGX to be flooded with corporate earnings as more companies publish 2022 numbers, which will be accompanied by dividend declarations. We believe this should provide a catalyst for buying activities even as risk-averse investors are likely to remain cautious due to medium-term expectations of an uptick in fixed-income yields.
“Overall, we advise investors to seek trading opportunities in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings,” analysts at Cordros Securities stated at the weekend.
Former president of Chartered Institute of Stockbrokers (CIS) and Managing Director, Arthur Steven Asset Management, Mr Olatunde Amolegbe, said the stock market was poised for another positive return in 2023, breaking its past negative cycles of anxious pre and post-elections years.
According to him, most indicators and trends point towards another positive return for the stock market in the year.
Sectoral analysis showed that the Nigerian market performance was driven by widespread positive sentiments across the sectors, especially within the oil and gas and banking sectors. Sectoral indices at the NGX closed positive, in a rally that saw pensioners and ethical investors recording substantial gains despite the selective nature of their investments.
With the naira redesign and cashless policy of the Central Bank of Nigeria (CBN) locking more funds and customers into banks, banking stocks have become toasts of the public. Expectations of relative stability and improved operations in the oil and gas sector have also been driving investors into oil and gas stocks.
The NGX Oil and Gas Index led the indices with above-average return of 15.07 per cent at the weekend. It had rallied by 34.05 per cent in 2022. The NGX Banking Index followed with above-average gain of 9.49 per cent. It had posted a modest return of 2.81 per cent in 2022. The NGX 30 Index-which tracks the 30 largest stocks at the exchange, closed weekend with 5.62 per cent, tracking its 6.98 per cent full-year return for 2022.
The NGX Consumer Goods Index has gained 5.12 per cent so far this year. The NGX Insurance Index rose by 3.87 per cent while the NGX Industrial Goods Index posted average year-to-date return of 2.16 per cent. The NGX Pension Index- which serves as gauge for stocks that meet the more stringent investment guidelines for pension funds, rallied average gain of 7.59 per cent while the NGX Lotus Islamic Index- which tracks stocks that comply with Islamic finance rules, closed weekend with average return of 5.26 per cent.
The rallied gathered momentum last week with more than two advancers for every decliner. There were 55 gainers and 27 losers last week compared with 44 gainers and 29 losers recorded in the previous week. International Energy Insurance led the rally last week with a gain of 57.14 per cent to close at 99 kobo. Northern Nigeria Flour Mills rose by 44.44 per cent to close at N9.75. Geregu Power, which declared a dividend per share of N8, rallied 36.88 per cent to close at N219. MRS Oil Nigeria rose by 20.94 per cent to close at N19.35. John Holt added 20.91 per cent to close at N1.33 while Seplat Energy appreciated by 20.45 per cent to close weekend at N1,325 per share.
On the negative side, Chams Holdings led the losers with a drop of 16.67 per cent to close at 25 kobo. Guinness Nigeria, Ikeja Hotel and NCR Nigeria followed with a loss of 10 per cent each to close at N63, 99 kobo and N3.24 respectively. Academy Press declined by 9.85 per cent to N1.19. SUNU Assurances Nigeria dropped by 8.11 per cent to 34 kobo. Ardova lost by 7.59 per cent to close at N17.65 per share while RT Briscoe and Eterna declined by 6.67 per cent each to close at 28 kobo and N7 respectively.
The momentum of activities also improved considerably with total turnover rising to 3.789 billion shares worth N27.500 billion in 20,333 deals last week, as against a total of 756.769 million shares valued at N13.653 billion traded in 18,248 deals two weeks ago.
The financial services sector led the activity chart with 3.461 billion shares valued at N7.182 billion traded in 8,978 deals; thus contributing 91.35 per cent and 26.12 per cent to the total equity turnover volume and value respectively. The conglomerates sector followed with 78.306 million shares worth N210.522 million in 746 deals while the consumer goods sector placed third with a turnover of 54.009 million shares worth N1.923 billion in 3,405 deals.
The three most active stocks were Universal Insurance Plc, Guaranty Trust Holding Company Plc and Zenith Bank Plc, which altogether accounted for 3.048 billion shares worth N4.653 billion in 2,674 deals, representing 80.45 per cent and 16.92 per cent of to the total equity turnover volume and value respectively.
Also, a total of 1.082 million units of exchange traded products (ETPs) valued at N11.738 million were traded in 62 deals compared with a total of 3,892 units valued at N785,074 traded in 38 deals two weeks ago.
At the secondary bond market, a total of 31,683 bond units valued at N32.25 million were traded in 35 deals compared with a total of 29,711 units valued at N29.90 million swapped in 27 deals two weeks ago.