The Nigerian stock exchange N2.6 trillion deal flow has outperformed peers in the first six months (H1) of 2024.Equities worth N2.604trillion were traded on the Nigerian Exchange Limited (NGX) in H1 of this year, representing year-on-year (YoY) increase by N1.153trillion or 79.46percent when compared to equities worth N1.451trillion traded in the corresponding period of 2023.
Out of the total value of stocks traded in H1’24, foreigners accounted for N540.48 billion or 20.75 percent, while domestic investors traded equities valued at N2.063trillion or 79.25percent of the total, according to recently released equities trading data by the NGX seen by BusinessDay.
Nigeria had an impressive outing in H1 of the year, which placed its stock market as Africa’s best. The Nigerian Bourse outperformed Casablanca Stock Exchange (+9.99percent), Namibian Stock Exchange (+10.06 percent), Tunis Stock Exchange (+11.15 percent), and The Egyptian Exchange (+11.54 percent).
The Central Bank of Nigeria (CBN) recently raised its Monetary Policy Rate (MPR), also known as the benchmark interest rate, to 26.75 percent from 26.25 percent, strengthening the sell-side of the equities market in favour of fixed income instruments.
“Although the MPC’s interest rate hike reinforces its dedication to combating inflation through a tightening cycle, we anticipate a moderate impact on financial markets. We opine that the 50 basis points (bps) increase will have a limited effect on investor sentiment in the equities market, especially since we don’t foresee a substantial rise in treasury yields in the short term,” according to Lagos-based Meristem research analysts.
Meristem research analysts further noted in their July post-MPC report that broader market drivers may pose key factors in shaping investor sentiments and chiefly spur market activities in the near term.
“Particularly, we expect investors’ reaction to half-year earnings releases and other corporate actions to determine market performance in subsequent weeks. In the same vein, we foresee improved bargain-hunting activities as investors cherry-pick across stocks with attractive upside potential and sound fundamentals. However, we note that shifts in sentiment, driven by investors’ outlook on macroeconomic factors, might occasionally dampen the mood in the local bourse.”
As at July 22, the NGX ASI grew by 34.50 percent year-to-date (YtD) as against 33.81 percent in the first half of 2024. Likewise, the All-Share Index has surpassed the 100,000 psychological mark (100,568.63 points as at July 22) from the 74,773 points it started at the beginning of the year.
In January, total equities traded on the NGX were worth N651.52billion, February (N357.88billion), March (N538.54billion), April (N346.23billion), May (N355.38billion), and June (N354.55billion).
According to the NGX trading figures polled from market operators on their domestic and foreign portfolio investment (FPI) flows in the review half-year, foreigners brought in N229.07billion and took away N311.41billion. Domestic retail investors were responsible for equities transaction worth N999.21billion while domestic institutional investors traded equities worth N1.064trillion in H1.
Assuming all other factors remain constant, CardinalStone research analysts expect Tuesday’s hawkish stance to drive a modest increase in fixed-income yields. In their view, the decision will likely be the final rate hike this year, “as we anticipate the CBN will hold interest rates steady, supported by an expected moderation in inflation due to the base effect starting in July 2024. Consequently, we maintain our recommendation that fund managers adopt a laddered approach with a greater emphasis on longer durations.”
As at June 30, 2024 total transactions at the nation’s bourse decreased marginally month-on-month (MoM) by 0.23percent, from N355.38 billion (about $239.56 million) in May 2024 to N354.55 billion (about $241.06 million) in June 2024.
The performance of June transaction when compared to the performance in June 2023 (N406.75 billion) revealed that total transactions decreased by 12.83percent. In June 2024, the total value of transactions executed by domestic investors outperformed transactions executed by foreign investors by approximately 54 percent.
A further analysis of the total transactions executed between May 2024 and June 2024 revealed that total domestic transactions increased by 17.85percent from N231.10 billion in May 2024 to N272.36 billion in June 2024. However, total foreign transactions decreased by 33.87percent from N124.28 billion (about $83.78 million) to N82.19 billion (about $55.88 million).
In a bid to address rising inflationary pressures while simultaneously creating an attractive environment for foreign investment, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has been aggressive in raising policy rates.
“This is expected to continue in the latter part of the year, as the governor of the central bank has continuously clamoured for higher interest rates in a bid to tame inflation.
“As we enter the second half of 2024, three key variables are expected to influence interest rate decisions: moderation in inflation, accretion to foreign reserves, and exchange rate stability,” Comercio Partner research analysts said in their recent macroeconomic outlook.
