• Monday, May 27, 2024
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Market posts biggest single-day loss in April

Nigeria’s rate hike further hurts stocks

…investors lose over N598bn

The Nigerian Exchange Limited (NGX) All-Share Index (ASI) on Tuesday posted biggest single-day loss in April after it decreased by 1.04 percent at the close of trading. In 10,170 deals, investors exchanged 403,889,860 shares worth N8.381billion.

The Nigerian Exchange Limited (NGX) All-Share Index (ASI) and Market Capitalisation depreciated from 101,777.12 points and N57.560 trillion respectively to 100,717.19 points and N56.962trillion. Investors lost about N598billion.

Read also: Elevated fixed income yields, others to dampen equities market in Q2

For the eight consecutive session, the Nigerian bourse extended its losing streak as the benchmark Index closed 1.04 percent weaker – the biggest single day decline since this April.

“Do Nigerian equities provide long-term inflation-beating returns for investors? The answer is ‘yes’”, said Coronation Research analysts in their recent note.

They analysts recently published “The Glorious Dividend, which tracks, over the period January 1, 2016 to the end of 2023, the fortunes of a portfolio of 10 stocks selected for their superior long-term Return on Equity (RoE, our benchmark is a minimum 20.5 percent) and their dividend paying.

“The portfolio easily beats inflation. The trick is to reinvest dividends into the companies that pay them,” they added.

“For the fourth consecutive week, the local bourse closed negative, amidst the Central
Bank’s efforts to force banks to raise fresh capital. The All-Share Index lost 1.09 percent to close at 102,314.56points, bringing the year-to-date return of the index to 36.83 percent.

Read also: Equities market dips by 0.29% as profit taking persists

“We identified 11 listed High RoE companies: Dangote Cement; Nestle Nigeria; Guaranty Trust Holding Company (GTCO); Zenith Bank; Stanbic IBTC Holdings; Dangote Sugar; Okomu Oil; Presco; NASCON; Custodian Investment; and MTN Nigeria. We excluded MTN Nigeria in our long-term study of equity returns because it was only listed in 2019.

“Our study is agnostic with regard to the sector. The High RoE Equity model portfolio, with dividends reinvested, returned 763.2 percent over the eight years to the end of
2023, with a compound annual growth rate (CAGR) of 30.9 percent, easily beating inflation.

“Admittedly, 2023 was a spectacular year for the model portfolio, so we also measured its performance up to the end of 2022. During the seven years from January 1, 2016 to the end of 2022, it returned 302 percent, with a CAGR of 22 percent, again beating inflation over the same period. We believe that there needs to be a new dialogue between long-term equity investors, including pension funds, and the most profitable, dividend-paying NGX-listed companies. Committed long-term investors need to own companies like these,” Coronation Research analysts explained further.