Nigeria led other countries like Kenya, Japan, and Zambia, which were among the world’s top-performing stock markets in the first quarter (Q1) ended March 2024.
A combination of increased buy-side activities and new listing (Transcorp Power) pushed the Nigerian Exchange Limited (NGX) All Share Index (ASI) to over 104,000 mark in Q1.
This major feat by the stock market of Africa’s largest economy came despite negative impact of two consecutive times of Monetary Policy Rate (MPR) hikes in the review quarter as the Central Bank of Nigeria (CBN) battled to save falling naira and skyrocketing inflation.
The Nigerian Exchange Limited (NGX) All Share Index (ASI) increased by 39.84percent as at Q1 ended on March, 2024. The All-Share Index (ASI) and equities market capitalisation closed the review period at 104,562.06 points and N59.120trillion.
Stocks that surpassed the NGX ASI include Geregu Power (+150.6percent), Dangote Cement (+114.7 percent), BUA Cement (+47.6percent), Mayer (+56percent), BUA Foods (+96.4percent), FBN Holdings (+51percent) and Wema Bank (+51.8percent).
Among others, stocks that helped to hedge market against rate hike in Q1’2024 are PZ Cussons (+42.3percent), Seplat Energy (+45.9percent), Transcorp (+64percent), NEM (+57.1percent), Cornerstone Insurance (+46.4percent), Julius Berger (+53.5percent), Transcorp Power (+57.1percent).
In the review quarter, NGX 30 which tracks the top 30 companies in terms of market capitalisation and liquidity increased by 39.08 percent. The NGX Industrial Index rose most by 78.49percent; followed by NGX Consumer Goods Index (+43.66percent), NGX Banking Index (+14.76 percent), NGX Oil & Gas (+24.09 percent), and NGX Insurance (+26.20percent).
The NGX ASI led other global top 10 like S& Merval TR ARS (+30.52percent), Nairobi All Share (+27.87 percent), Nekki 225 (+21.81percent), Kazakhstan KASE Stock Exchange (+20.26 percent), BIST 30 Index (+18.68 percent), and TOPIX Index (Tokyo) (+18.29 percent).
The NGX ASI also surpassed the BIST 100 Index (+17.89percent), Lusaka Stock Exchange All Share Index (+17.67 percent), and Slovenian Blue Chip Index (+17.25percent).
Rising from its second meeting this year, the Monetary Policy Committee (MPC) recently raised the Monetary Policy Rate (MPR) to 24.75 percent, representing 200 basis points increase, a development market watchers expected would have potentially constrained liquidity in the equities market space.
“For the financial markets, the implication of the hawkish stance will be mixed. We foresee higher treasury trends in the fixed income market while the equity market will not be heavily impacted as investors have factored in the hike in their positions. Ultimately, the increased yields are expected to attract foreign investment into the domestic fixed-income market which may help to stabilise exchange rate,” said Meristem Research analysts.
With the MPC maintaining its hawkish stance, the analysts retained their expectation of a muted reaction on the domestic equities market “as investors had mostly factored in the extent of increase in MPR into their positions”.
In what Meristem analysts tagged ‘Walking Cautiously on Wobbly Terrains’, they said the MPC’s decision is expected to send positive signals to foreign investors, “especially as the exchange rate stabilises and the Naira continues to appreciate on the official window. This should provide some clarity regarding concerns about repatriation of funds and subsequently, a steady re-entrant of foreign investors”.
“In the near term, we anticipate a continuation of mixed sentiment in the local bourse. The expectation of the release of financial services sector earnings is likely to drive an upbeat mood. However, with gloomy outlook for some sectors’ Q1:2024 results, we do not overlook the possibility of further selloff triggers. Finally, given that yields in the fixed income market are trending upward, presenting an attractive option for investors compared to equity assets, we do not foresee strong inflow of funds into the equities market. This supports our expectation of a blended sentiment for the equities market in the near term,” the analysts noted further.
Coronation research analysts in a March 25 note to investors titled “More equities for pension funds?” said that, “Our sense is that pension funds’ enthusiasm for equities is cooling off.
“And why wouldn’t it? Market interest rates are rising and it is possible that their portfolios of Nigerian Treasury Bills (T-bills) will yield more than double what they yielded last year. While fixed-income yields fall well short of the rate of inflation, it is possible that pension fund managers today are content with what T-bills and FGN bonds have to offer.”
