Equity trading on the Nigerian Exchange Limited (NGX) finished the month of July in the green territory as the NGX All-Share Index appreciated by 5.5% to close at 64,337.52 index points.
Despite concerns such as rising inflation, interest rate hikes, and apprehension surrounding the fallout of the 2023 general elections, investor confidence remained strong, leading to increased buying activity.
Nigeria’s main shares index has continued to soar as investors cheered Bola Ahmed Tinubu’s inauguration speech as Nigeria’s 16th president.
The positive sentiment among investors can be attributed to several factors, including the peaceful transition to power following the 2023 elections, favourable policies introduced by President Bola Tinubu’s new administration such as the removal of fuel subsidies, streamlining of exchange rates, and the floating of the naira.
Investors responded to the changes in Nigeria’s foreign exchange operational framework and viewed President Bola Tinubu’s decision to suspend Central Bank Governor Godwin Emefiele, who had implemented restrictive policies affecting their profits, in a favourable light.
Market performance
Available statistics to the Nairametrics showed that the All-Share Index, which is the broad index that measures the performance of Nigerian stocks, opened the trading month at 60,968.27 index points at the beginning of trading on July 3, 2023, and closed at 64,337.52 points at the end the month on Jul 31, gaining 3,369.25 basis points or 5.5%.
Further analysis revealed that activities on the Nigerian Exchange Limited (NGX) which opened the trading year at N33.197 trillion in market capitalization at the beginning of trading, closed the month at N35.011 trillion, hence has earned a month-to-date gain of about N1.814 trillion or 5.5%.
What the market operators are saying
Executive Vice Chairman, of Hicap Securities Limited, David Adonri, said that investors were in the earning season and that what investors will get from dividends is one of the factors that drove the demand for shares in the market during the half year.
He noted that the equities market is defying current political uncertainties because investors are futuristic that the prospect for a yield environment is bright.
- “Most companies, especially banks, released their 2022 full-year results during the first quarter. The market normally sustains positive sentiment during the earning season.
- However, the season was within the period of an election, but I think the craving for dividends overshadowed what would have been the impact of the elections,” he said.
The Managing Director, of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe said that a Demographic shift has happened in the NGX in the last few years.
- “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’s why you see the NGX ASI continuing to rise despite all the uncertainties in the environment.”
Amolegbe further said that the expectation that the policies will encourage the inflow of foreign investment is the primary trigger that is causing the stock market rally.
- “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.
- He explained that the other driver might also be the fact that we are moving toward the end of the first half of the year, and this normally led to portfolio rebalancing by fund and asset managers,
- “They rebalance their portfolio every quarter and every half year and this normally results in the stock rally,” he said.
