In eight months to August 31, Nigeria’s equities market capitalisation garnered about N8.5trillion. The stock market, which saw sections of profit taking and bargain hunting reached a 15-year high ahead of last month end.
The pro-market posture of President Bola Ahmed Tinubu’s administration had increased stock investors’ confidence and optimism in the stock market. Also, the broadly positive sentiment that has lingered in the Nigerian equities market since the start of May persisted through just ended August.
The Nigerian equities market opened year 2023 with All Share Index (ASI) at 51,251.06 points and market capitalisation of N27.915 trillion respectively, but both performance indicators rose to 66,548.99 points and N36.422 trillion as at August 31, 2023.
The stock market rose by 3.44 percent or N1.4 trillion last month as investors continued to show remarkable buy interest particularly in the financial services and oil and gas sectors, which helped push the market’s eight months return to +29.85 percent.
Given the optimism around the ongoing macroeconomic reforms (exchange rate price discovery, fuel subsidy removal, CBN reform), and anticipated improvement in the country’s macroeconomic condition, Meristem research analysts expect investors to continue to take position strategically, especially in sectors that are poised to benefit from changes (financial services, oil and gas, agriculture).
“Based on our forecast, we project a 26.85percent return for the equities market in 2023 while the All-Share Index is expected to settle at 60,974.33 points. This is hinged on the expectation of improved corporate performance, gradual improvement in Foreign Portfolio Investment (FPI) inflows and likelihood of equity capital raising,” Meristem analysts noted in their 2023 half year outlook.
They expect investors interest in the equities market to be sustained and positive sentiment to persist for the rest of the year. The analysts’ considerations include less hawkish monetary policy stance leading to improved valuations and a likely moderation in fixed income yields. Also, their bullish outlook for the market is pinned on their anticipation of positive corporate results in coming quarters which will continue to sustain equities market performance. “Particularly, we expect investors interest in the financial services and tech sectors to remain strong,” Meristem analysts noted .
Stock like MRS has led the pack of top advancers this year after its price rose by 676.2percent in eight months to August. It was followed by FTN Cocoa (+641.4percent) and Transcorp Hotels (+539.8percent).
Other major advancers are Skyway Aviation Handling Company (+463percent), Transnational Corporation (+437.2percent), Nascon (+355.4percent), Conoil (+273.6percent), Nahco (+268.8percent), CWG (+261.4percent), Dangote Sugar (+242.7percent) and Tripple Gee and Company (+205.1percent).
Lagos-based analysts at United Capital noted in their recent outlook for the second half (H2) of the year noted that the Nigerian stock exchange was met with a fantastic first half in 2023, adding that they anticipate a broadly favourable equities market in H2 of 2023.
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The analysts supported their expectations on two key factors: the “unification of the exchange rate”, and “advocacy for a lower interest rate environment”.
These factors they said will stand as a significant upside for the earnings performance of listed Nigerian corporates, “which will bolster investors’ confidence toward listed corporates, particularly in earning seasons (H1-2023, and Q3-2023 earnings season)”.
Looking further at the banking stocks, it shows Sterling Financial Holding Company with 138.6percent return in eight months to August 31 led others like Unity Bank (+121.8percent), Access Corporation (+95.3percent), Stanbic IBTC (+94.3percent), and UBA (+84.2percent).
Other banking stocks and their eight months return are ETI (+41.5percent), FBN Holdings (+54.1percent), FCMB (+46.8percent), Fidelity Bank (+62.1percent), GTCO (+59.6percent), Jaiz Bank (+63percent), Wema Bank (+25.6percent), Zenith Bank (+37.1percent), and Union Bank (+1.6percent).
In their August performance review, equity research analysts at Lagos-based Vetiva said their conviction stocks closed higher in August, returning 1.9percent month-on-month (m/m), “however, they underperformed the ASI by 1.6 percentage points (ppts). Year-to-date (YtD), our picks have yielded a return of 60.5percent, outperforming the ASI by 30.6ppts.”
“For our banking picks, FCMB (-13.7percent m/m), Stanbic (-6.5percent m/m) and Fidelity Bank (-18.4percent) dragged our aggregate conviction stocks return by 5.5ppts. Moving to the Consumer Goods sector, Dangote Sugar (+103.7percent m/m) had a strong showing in August, whereas Nestle (-6.4percent) closed in the red. All in, their performance contributed a 6.6percent return on our picks,” the Vetiva analysts said in their September 1 note.
“In the Agriculture and Oil and Gas sectors, Okomu Oil eased by 5.7percent m/m, while Total Energies closed flat m/m. Overall, this dragged the performance of our conviction stocks by 0.6ppts. On the other hand, it was a bullish month for our picks in the Industrial Good space.
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“The performances of Julius Berger (+3.6percent m/m) and Lafarge Africa (+9.2percent m/m) drove a return of 0.9percent on our picks. Finally, in the Telecommunications space, MTNN rebounded m/m, appreciating by 4.8percent, yielding a return of 0.6percent on our conviction stocks,” they noted.
Other stocks in the Oil & Gas sector that impressed investors are Eterna which rose by 139.2percent in eight months, Japaul Oil (+221.4percent), Oando (+42.9percent), Seplat Energy (+67percent), and Total Energies (+99.5percent).
Investors (both foreign and domestic) had traded N2.154trillion worth of Nigerian equities in seven months to July 2023. The record level of equities traded on the Nigerian Bourse in the review seven month to July represented a remarkable increase when compared to N1.763trillion recorded same period in 2022.
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While foreigners traded N185.62billion worth of stocks, representing 8.62percent, domestic investors traded equities valued at N1.968trillion in the same seven months period, representing 91.38percent of the total value traded, according to summary of equities transactions as at seven months to July 31.
Foreign inflow into equities worth N81.47billion while outflow from the market was N104.15billion. Domestic retail investors traded stocks worth N640.44billion in seven months while domestic institutional investors accounted for N1.328trillion worth of equities in same period under review.
