Despite low foreign participation in the Nigerian stock market due to uncertainty, foreign exchange crisis, rising inflation rate and other macroeconomic challenges, investors gained N15.64 trillion in the first half of (H1) 2024.
Equities trading concluded the first half of the year with notable positivity, propelled by a surge in investors’ confidence directed towards listed corporations.
The exceptional performance stands as a milestone in Nigerian Exchange Group (NGX) history, defying prevailing economic challenges such as elevated inflation, a depreciating exchange rate and persistent security concerns.
The market capitalisation gained N15.64 trillion from N40.91 trillion at the beginning of the year to close at N56.60 trillion at the end of June 28, 2024.
Similarly, NGX Limited’s all-share index (ASI) rose by 33.81 per cent from 74,773.77 points on December 29, 2023 to 100,057.49 points on June 28, 2024.
However, the equities market recorded mixed performances in the first two quarters, which made up the first half of the year. The first quarter saw an impressive return of 39.84 per cent, driven by strong company earnings and positive dividend announcements and also propelled by the listing of Transcorp Power Plc, a subsidiary of Transcorp Plc and the second quarter experienced a decline of 4.31 per cent.
Capital market analysts stated that the stock market’s improved performance in H1 2024 is on the backdrop of mixed corporate earnings by listed companies and federal government’s reforms in the foreign exchange market.
Speaking on market performance in H1, the Vice President, Highcap Securities Limited, David Adonri, stated that investors are trading based on sentiment.
However, he expressed optimism that the stock may maintain its positive momentum in H2 on the backdrop of banking sector recapitalisation and expected H1 corporate earnings by listed firms, especially banks.
The Managing Director of Arthur Steven Asset Management Limited, Olatunde Amolegbe, said the expectation that the government policies would encourage the inflow of foreign investment was the primary trigger that propelled the stock market rally in Q1.
“The second trigger will include the fact that some of these policies will lead to a short-term increase in inflation level and typically stock prices tend to rise along with inflation,” he said.
Amolegbe added that a demographic shift has happened in the NGX in the last few years, saying: “We now have more local institutions and retail investors in the market than foreign portfolio investors. The reverse used to be the case. This shift has naturally reduced volatility in stock prices as the locals are likely to have more faith in the local market than foreigners.”
Also, an investment banker and stockbroker, Tajudeen Olayinka, stated that the N15.6 trillion market capitalisation gained in H1 2024 is an indication of the presence of huge liquid funds in the hands of institutional investors who currently dominate activities in the stock market.
“It also holds the fact that the future is brighter for some of the listed companies, hence, investors are positioning their portfolios for that brighter future. This is also the reason the market remains resilient despite the high interest rate regime,” he said.
On the stock market projection for H2 2024, he said: “The second half of the year may be a bit challenging for a rapid price movement, given a catalog of offers from banks raising fresh capital to meet the new capital requirements for banks.
“It is going to be more of a balanced market, with investors exercising their rights to additional shares and/or taking new shares to maintain a balance. H2 2024 will be an interesting one for the market,” he said.
Analysts at Cowry Asset Management said: “Looking ahead, it is anticipated that the new trading quarter will commence strongly, albeit with mixed sentiment from market investors. The market will focus on the forthcoming earnings reporting season and interim dividends from the banking sector and a few other companies.
“The changing market structure on the NGX continues as bargain hunters take advantage of recent pullbacks and corrections to buy into value amidst ongoing portfolio repositioning ahead of Q2 numbers, ushering in the second half of the year. Investors are advised to seize opportunities in stocks with strong fundamentals.”
