Nigeria’s equities gain N2.16trn in May

Nigeria’s stock investors booked about N2.16trillion gain in the month ended May 31,thereby defying the market’s adage ‘Sell in May and go away’.
‘Sell in May and go away’ is an adage referring to the historically weaker performance of stocks from May to October compared with the other half of the year.

The huge gain seen in equities came amid long-awaited rate hike which took place in the later part of the review month of May, which ushered in expectations that in near-term, fixed income yields will be more attractive than equities return.

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The Nigerian Exchange Limited (NGX) All-Share Index (ASI) and Market Capitalisation which had opened the review month at 49,638.94 points and N26.761 trillion respectively, rose to 53,637.14 points and N28.916trillion as at month ended May 31, 2022.The market increased by 8.05percent or N2.16trillion in May.
From year-open lows of 42,716.44 points and N22.30trillion to 53,637.14 points and N28.916trillion as at month ended May 31, the market’s benchmark indicator and capitalisation rose by 25.57percent and N6.62trillionin five months to May 31.

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Africa’s largest economy joined the ranks of countries that are implementing tighter monetary policies as its Monetary Policy Committee (MPC) last week voted to raise the monetary policy rate (MPR) to 13percent.

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“In the near term, we anticipate that the MPC’s decision will result in higher fixed income yields and selloffs in the equity market,” according to Lagos-based analyst at Vetiva in their May 30 breakfast report.
They had anticipated market’s tepid start to this week “as investors continue to bargain hunt across board.”

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“We expect sentiments to remain soft and could support further profit taking, particularly if fixed income yields continue to surge in light of the MPR rate hike. Nevertheless, we advise investors not to panic and rather take advantage of the dip to increase positions in attractively priced fundamental stocks,” said analysts at Lagos-based United Capital.

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“The equity market closed transaction for last week positive, as investors’increased buying was seen in some blue-chip stocks such as Airtel Africa,and others. We expect mixed sentiment in the market this week,” according to GTI Research analysts in their May 30 note to investors.

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“This week, barring any significant gain on heavy-weight tickers, we expect the market to close in the negative zone. We see room for profit taking activities on tickers that have gained appreciably in recent weeks.

“Likewise, we consider the recent uptick in rates in the fixed income environment and how this may negatively impact investors’ participation in the equities market. Overall, we expect the market to close in the negative region this week,” Meristem analysts said in their May 30 note to investors.

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