• Thursday, February 29, 2024
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BusinessDay

Nigeria’s stocks rally on increasing domestic participation

Stock market down by 1.27% as investors seek better yields after MPC rate hike

…local investors accounted for 88.78% of N3.23trn equities transactions in 11 months

Domestic investor activity is key to spurring growth in the stock market in a country.

In the eleven months to November 2023, Nigeria stock investors exchanged equities worth N3.233trillion, higher than N2.183trillion recorded same period in 2022.

Out of this record amount, foreign investors were responsible for N362.75billion or 11.22 percent, while local investors accounted for N2.871trillion or 88.78 percent.

The stock market of Africa’s largest economy is outperforming all peers in the Europe, Middle East and Africa region as pension funds and institutional investors buy stocks on positive outlook of profits from banks recording revaluation gains on their FX positions.

In the review eleven months period, foreign inflow into the stock market was N157.32billion while foreign outflow was N205.43billion.

Domestic retail investors traded equities worth N1.023trillion while domestic institutional investor were responsible for stocks transactions worth N1.842trillion.

The Nigerian equities market closed the year 2023 with equities capitalisation at N40.917trillion and NGX All Share Index (ASI) at 74,773.77 points. The market finished 2023 with returns of 45.90 percent.

Bargain hunting activities at the Nigerian Exchange Limited (NGX) continued on Monday, pushing the benchmark performance indicator above 84,000 mark.

After a successful outing in 2023, most research analysts are positive in their outlook for equities this year 2024.

Record sessions of positives seen this year at the Nigerian equities market have pushed it up by 13.20 percent, making it world’s second best in 2024, after Argentina.

With only one session of negative close this year, Nigeria’s stock market has advanced positively as investors continued to take advantage of the relative cheapness of some counters while positioning ahead of full year results and corporate actions.

Banks and other listed companies are due to release their full year 2023 financials and investors are bullish to see dividend proposals.

“This week, we expect the local bourse to sustain its positive momentum. Our outlook for the Nigerian market and the anticipation of more corporate actions are likely to drive investors’ interest in the search for value.

“Building on recent weeks’ performance, we anticipate some profit-taking activities due to declining liquidity levels. Also, tickers trading at extremely high levels may prompt investors to take gains on stocks that have appreciated significantly.

“On a balance of factors, we expect the positive sentiment to continue barring a negative development that may sway market in the opposite direction. Thus, we anticipate the NGXASI to close in the green zone this week,” said Lagos-based Meristem research analysts in their recent note.

Over a sixteen (16) year period, domestic transactions decreased by 45.30 percent from N3.556trillion in 2007 to N1.945trillion in 2022 while foreign transactions also decreased by 38.47percenr from N616billion to N379billion over the same period, according to Nigeria Exchange Limited (NGX) report on domestic and foreign portfolio investment.

Nigerian Exchange Limited (NGX) on a monthly basis polls trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI)
flows.

As at November 30, 2023, total transactions at the nation’s bourse increased month-on-month (MoM) by 34.08 percent, from N220.94billion (about $243.93million) in October 2023 to N300.67billion (about $319.15million) in November 2023.

The performance of the review month when
compared to the performance in November 2022 (N104.28billion) revealed that total transactions increased by 188.33percenr.

In November 2023, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by circa 52 percent

The total transactions executed between November 2023 and prior month (October 2023) revealed that total domestic transactions increased by 22.24percent from N187.58billion in October to N229.30billion in November 2023.

Similarly, total foreign transactions increased by 113.94percent from N33.36billion (about $36.83million) to N71.37billion (about $75.76million) between October 2023
and November 2023.

The Nigerian equities market closed in the green zone for the second trading week of the year as the All-Share index (NGX-ASI) gained 4.24percent week-on-week (WoW) to reach 83,042.96 points.

Across sectoral indices, NGX Banking rose by +5.10 percent WoW, NGX Consumer Goods (+9.60 percent WoW), NGX Insurance (+7.63 percent WoW), and NGX Industrial Index (+4.80 percent WoW) recorded gains while NGX Oil and Gas (-1.61 percent WoW) closed in the red zone.

“The market returned 4.24 percent week-on-week (w/w) compared to prior week’s 6.54percent, as we saw some profit taking action this week.

“Also, given the strong close in the consumer goods sector, we are likely to see price correction in that space at the start of trading next week, while other sectors trade mix,” said Lagos-based Vetiva Research analysts.