These stocks spurred market’s 3.88% rise in January

The 3.88percent growth in Nigeria’s equities market last month came as investors took position in stocks that traded at attractive prices.

Despite the MPC reiterating its hawkish disposition, the positive sentiment persisted in stock market in the review month. This was evident in remarkable buy interest investors showed across all key sectors on the Nigerian Exchange Limited (NGX).

Amid record interest in industrial stocks, investors were more bullish in buying banking, consumer goods, oil & gas, and insurance stocks.

NGX Banking Index was up by 6.83percent in January, followed by NGX Consumer Goods Index which rose by 5.64percent. Also, NGX Oil & Gas Index increased by 5.41percent in the review trading month; NGX Insurance Index rose by 5.36percent, while NGX Industrial Index increased by 2.14percent.

“January’s market performance can serve as an indicator for the yearly performance of the local bourse. Our study shows that in approximately 60percent of instances, January sets the trend for the annual return. The positive gains recorded in January 2023 support the likelihood of a positive outcome for the year,” said Meristem research analysts in their recent market review and preview.

“A major highlight on the local bourse has been the release of 2022FY financial scorecards, with many companies recording impressive performance. Specifically, preliminary releases of companies in the banking sectors shows robust growth in both gross earnings and profitability, eliciting a favourable response from investors since the publication of results,” the analysts said.

Some of the stocks that contributed to the record 3.88percent increase in January include John Holt which increased by 82.2percent; Mutual Benefits (+44.4percent), Sunu Assurance (+27.6percent), Nahco (+26.6percent), and Fidelity Bank Plc (+24.1percent).

Others are: Northern Nigeria Flour Mills (+20.3percent), Linkage Assurance (+20percent), Regency Alliance (20percent), Chams (+22.7percent), Tripple G (+21.5percent), and Ecobank Transnational Incorporated (ETI) which increased by 16.5percent.

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In January, the market defied expectations by maintaining strength despite signs of overstretching. In the review month, Sterling Bank share price increased by 10.7 percent. Further look at the banking counters showed that Access Corporation went up by 7.1percent, FBN Holdings (+7.3percent), FCMB (+8.1percent), GTCO (+8.5percent), UBA (+7.9percent), Wema Bank (+5.1percent), and Zenith Bank (+4.2percent).

In the other financial institution sector, stocks like United Capital increased by 6.8percent last month; while Healthcare sector stock like May & Baker went up by 12.8percent. Neimeth increased by 9.1percent, Fidson Healthcare rose by 9.9percent, while GSK was up by 5.7percent last month. For the Telecoms, MTNN rose by 4.7percent to outshine its counterpart Airtel Africa which increased by 1.5percent in January.

Multiverse Mining & Exploration Plc, a natural resources stock rose by 10.6percent last month; while in the Services sector, Caverton Offshore Support Group increased by 4percent, C&I Leasing was also up by 8.1percent, and Ikeja Hotel (+4.8percent).

“The market has maintained a positive month-on-month (m/m) close since November… We saw the December rally filter into the new year, as earnings results take centre stage,” equity research analysts at Lagos-based Vetiva had said on January 31.

For the industrial stocks, Berger Paints increased by 15.8percent, CAP was up by 14 percent, while Lafarge Africa went up by 4.6percent. In the consumer goods sector, Dangote Sugar increased by 8.1percent, Flour Mills was up by 5.6percent, while Unilever increased by 16.8percent.

In the Oil & Gas sector, Eterna increased by 12.1percent, MRS was up by 13.5percent, while Total went up by 16.1percent last month. Agriculture sector stock like Okomu Oil Palm rose by 9.8percent last month, while Presco rallied by 9.7percent. Among the conglomerates, Transcorp followed John Holt (+82.2percent) after its share price went up by 8.8percent.

In line with analysts’ expectations, impressive full year results of listed companies are fuelling market’s buy-side activity in this new month of February. The value of Nigeria’s listed equities had increased by 3.88percent or N1.082trillion in the month ended Tuesday, January 31, 2023.

Insurance sector saw other stocks like Lasaco rise by 18.4percent, AIICO (+6.8percent), and Coronation Insurance (+12.5percent).

Positive sentiment continues despite possibility of profit taking…

Equity market watchers retain their positive outlook for Nigerian equities over the medium term. This is supported by depressed yields in the money market space. However, they express caution that following record gains, significant profit taking activities could see the market witness a pull back.

“We expect the bourse’s broad-based bullish run to continue as investors’ risk-on sentiments continue to prevail amid decent earnings performance and a depressed yield environment in the money market. We see room for pockets of bearish sentiments owing to profit-taking activities. We recommend that fund managers cherry-pick stocks with attractive prices, solid valuations, and dividend performance to take advantage of an extension of the current bullish run,” United Capital research analysts said in their recent note.

“The optimistic mood on the local bourse is expected to persist, fuelled by the release of corporate financial results for 2022. However, there are a few potential downside risks, such as the expectation of rising yields in fixed income markets and the possibility of political risk leading to a higher demand for risk premiums. Also, from a valuation perspective, the Nigerian equities market, with its Price-to-Earnings (PE) ratio of 10.10x, trades at a premium compared to its peers except South Africa (10.85x), which is an exception. The other markets such as Egypt (9.72x), Kenya (6.56x), Ghana (3.81x) trail behind,” Meristem further noted in their January monthly market review and preview.