The peaceful transition to a new administration, coupled with its blunt expression of willingness to tackle lingering macroeconomic challenges facing the economy, especially the foreign exchange (forex) crisis has caused the equities market to gain N1.8 trillion in May 2023.
Specifically, the market capitalisation gained by N1.833 trillion to close at N30.367 trillion on May 31, 2023 from N28.534 trillion at which it opened for trading activities for the month.
Also, the overall market performance measure, the all-share index (ASI), which tracks the general market movement of all listed equities on the Exchange, rose by 6.42 per cent to close at 55,769.28 points on May 31, 2023.
Similarly, at the reopening of transactions for June, market capitalisation increased by N21 billion to close at N30.387 trillion from N30.366 trillion at which it closed for May, while the All-share index appreciated by 38.97 from 55,769.28 to 55,808.25.
Operators attributed market performance in the period reviewed to improved corporate performance, triggered by optimism that the new administration’s remedial plans to tackle the myriads of problems bedevilling the economy could attract more investments.
The managing director of HighCap Securities Limited, David Adonri said investors are in the earning season and what they will get from dividends is one of the factors that is driving the demand for shares in the market.
Looking forward, Adonri said the President’s speech addressed three critical areas of national need, insecurity fuel subsidy and unification of exchange rates.
“I would attribute this gain to a new government bounce as investors are happy and this means that their confidence has doubled compared to how it closed last week. The policy announcements made by the President resonated well with investors and I believe that his comments on the pressure points were quite stimulating and this is what resulted in the huge gain”, he said.
Chief operating officer of InvestData Consulting Limited, Ambrose Omordion, said all sectors in the equities market witnessed a rally on the inflow of funds as investors and traders took the position in low, medium and high-cap stocks in anticipation of improved earnings on the back of inaugural promises.
“These supported the ongoing dividend income reinvestment in the market arena that had equally enhanced liquidity in the equity space, coupled with the better-than-expected Q1 numbers.”
The managing director, Arthur Steven Asset Management Limited, Olatunde Amolegbe stated 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. That is why you see the NGX ASI continuing to rise despite all the uncertainties in the environment.”
On market outlook, Cordros Securities Limited said: “Considering that we have previously argued that the new administration’s stance and intent to resolve key policy issues, particularly around the current forex framework and oil subsidy payments will be key catalysts for a better-performing equities market, we view the new President’s speech as positive for the equities market.
“Particularly, we believe the President’s statements on resolving current issues around multiple exchange rates and rectification of the current FX repatriation sit well with investors, evidence of which is the positive showing at the end of the month’s session.” Cordros however noted that policy reforms from the new administration have to be overarching to have a lasting impact on the local bourse over the long term.
