Investors in the Nigerian stock market smiled home with N5.3 trillion in the first half of 2023, H1’23, following bouts of bullish trades supported recently by the positive sentiments trailing inauguration of President Bola Tinubu’s administration last month.

The gains at 18.9 percent Year-to-Date, YtD, was the highest in 15 years.
In addition to the new regime sentiment, the market was also buoyed by the return of foreign investors, improved corporate earnings, low yield in fixed income market, among others.

However, analysts have cautioned the new administration to stick with the position of the Debt Management Office, DMO, not to go for external borrowing which could undermine the country’s economic growth projections and put Nigerians on further hardship.

Specifically, the stock market capitalisation which represents total value of investments on the Nigerian Exchange Limited, NGX, YtD appreciated by N5.282 trillion to close at N33.197 trillion last weekend from N27.915 trillion it closed in December 2022.

Details of market performance Year-on-Year, YoY, showed that as the market capitalisation in HI’23 rose 18.9 percent to N33.197 trillion another major performance indicator, the NGX All-Share Index (ASI), which tracks the general market price movement of all listed companies on the Exchange rose by 17.7 percent or 9,150.68 basis points to close at 60, 969.27 basis points last weekend.

The monthly breakdown shows the stock market in January 2023 gained 3.9% or N1.083 trillion; February it rose by 4.8 % or N1.402 trillion. In March it dropped by 2.8% or N856 billion while in April it dropped further by 3.4% or N1.01 trillion.

In May it rose by 6.4% or N1.832 trillion and in June 2023 it rose further by N2.831 trillion or 9.3% being the highest gain on monthly basis this year.

Foreign Portfolio Investment

Available current data of portfolio investment showed that as at 31 May 2023, total transactions at the nation’s bourse increased by 68.88% to N322.92billion (about $693.99million from N191.21billion (about $413.25million) in April 5, 2023.

However, on YoY basis the performance in May 2023 when compared to the performance in May 2022 which stood at N607.45billion revealed that total transactions decreased by 46.84%.

A further analysis of the total transactions revealed that total domestic transactions in May 2023 increased from N182.74billion in April to N285.76billion in May 2023.

Similarly, total foreign transactions increased significantly by 338.72% from N8.47billion (about $18.31million) to N37.16billion (about $79.88million) between April 2023 and May 2023.
Sectoral performance
Meanwhile, the weekly performance showed that Banking sector is still maintaining lead in positive sentiment with the Index gaining 54.59% while Insurance Index rose 58.91% and Pension Index 44.03%.
Top five gainers are Ikeka Hotel 33%, followed by Transcorp Hotels 32.95 %, Eternal 32.49% . Sterling Financial Holding garnered 30.74 % and Chams Holding 29.55%.

On the losers side, Secure Electronics dropped by 13.6% followed by Guinea Insurance and Universal Insurance dropping by 12.50 % each. Sovereign Trust Insurance dipped by 10.91 and Pharma Deko declined by 10%

Analysts/operators react

Commenting on the stock market performance in H1’23, Prof Uche Uwaleke, said: “The positive performance of the stock market in the first half of 2023 can be attributed to relatively peaceful general elections, the improved financial results of many listed companies in Q1 of 2023 as well as the policy reforms announced by the new administration, which boosted investors’ confidence in the Nigerian economy.

“Notable among these reforms is the fuel subsidy removal which has the potential of attracting foreign investments in the downstream sector of the petroleum industry and the unification of exchange rates which promises to enhance liquidity in the forex market and repatriation of funds by foreign investors.
”This explains why the greatest beneficiaries have been banking stocks, such as Stanbic, Zenith, GTCO, FBNH, as banks represent the vehicle for capital importation as well as companies in the oil and gas sector such as Seplat and Total.”

On his projections for the second half of 2023, he said: “Whether the bullish sentiment will be sustained in the second half of 2023, especially on the part of domestic investors, depends on how the impact of the reforms are managed as well as on the implementation of the policies contained in the President’s policy advisory aimed at boosting the capital market such as leveraging opportunities in infrastructure financing via Sukuk.

”My advice to the new administration is to manage the reforms in such a way that the shocks to the economy are minimised so they don’t lead to significant macroeconomic instability from higher inflation and weak economic growth.”

Commenting also, David Adonri, analyst and Vice Chairman at Highcap Securities Limited, said: “The equities market has appreciated so far by about 8% in June. This is monumental. The Market was driven majorly by sentiment arising from the smooth handover to President Tinubu and his bold economic policy changes. ”His prompt change of security chiefs also boosted investors’ confidence. The removal of Godwin Emefiele as CBN governor was another icing on the cake which impressed investors. All these added to the usual end of quarter rally to propel the equities market.”

On projections for H2’23, he said: “Since the huge gain was propelled by investor sentiment, interest in equities in H2 2023 can only be sustained if the policy changes translate into growth in corporate fundamentals and fall in interest rate. Otherwise, we might see a market correction that may purge equities off the sentiment that inflated it in June 2023. FGN should heed the advice of DMO to curtail further borrowing. 2023 budget ought to be reviewed and rationalized so as to avoid further public debt. The extra revenue FGN will earn from removal of fuel subsidy and unification of exchange rate should sufficiently cater for expenditure.”

Commenting, Victor Chiazor, analyst and Head of Research and Investment at FSL Securities Limited, formerly known as Fidelity Securities Limited , said: “The equities market currently reports a year to date return of 17.28% and is positioned to close the first half of the year with a decent return. This bullish sentiment was largely driven by decent corporate earnings, dividend payments, the relatively peaceful elections and relatively acceptable policy statements by the new government in its first few weeks in office.”

On his projection for H2’23, he said: ” The second half of the year will see the market react more to the government’s cabinet appointments and policy implementation as this will affect the listed companies performance in the market and decide the governments ability to attract foreign investors to the market that is currently dominated by domestic participants who currently control about 88% of the market. The current administration should see and explore the vast opportunities available in the capital market and it’s capacity for capital formation, as it aims to partner with the private sector and also grow government revenues.

Analysts at Cordros Securities, in a report titled, “Heightened uncertainties amid great policy unwind,” noted that while emerging (EM) and Frontier (FM) markets had been rattled by the impact of policy normalisation and inflationary pressures occasioned by the Russia-Ukraine conflict, the performance of the Nigerian financial market was relatively strong, stressing that the volatility in the Fixed Income (FI) market has also been uncharacteristically muted

Commenting also, David Adonri, analyst and Vice Chairman at Highcap Securities Limited, said: “The equities market has appreciated so far by about 8% in June. This is monumental. The Market was driven majorly by sentiment arising from the smooth handover to President Tinubu and his bold economic policy changes. ”His prompt change of security chiefs also boosted investors’ confidence. The removal of Godwin Emefiele as CBN governor was another icing on the cake which impressed investors. All these added to the usual end of quarter rally to propel the equities market.”

On projections for H2’23, he said: “Since the huge gain was propelled by investor sentiment, interest in equities in H2 2023 can only be sustained if the policy changes translate into growth in corporate fundamentals and fall in interest rate. Otherwise, we might see a market correction that may purge equities off the sentiment that inflated it in June 2023. FGN should heed the advice of DMO to curtail further borrowing. 2023 budget ought to be reviewed and rationalized so as to avoid further public debt. The extra revenue FGN will earn from removal of fuel subsidy and unification of exchange rate should sufficiently cater for expenditure.”

Commenting, Victor Chiazor, analyst and Head of Research and Investment at FSL Securities Limited, formerly known as Fidelity Securities Limited , said: “The equities market currently reports a year to date return of 17.28% and is positioned to close the first half of the year with a decent return. This bullish sentiment was largely driven by decent corporate earnings, dividend payments, the relatively peaceful elections and relatively acceptable policy statements by the new government in its first few weeks in office.”

On his projection for H2’23, he said: ” The second half of the year will see the market react more to the government’s cabinet appointments and policy implementation as this will affect the listed companies performance in the market and decide the governments ability to attract foreign investors to the market that is currently dominated by domestic participants who currently control about 88% of the market. The current administration should see and explore the vast opportunities available in the capital market and it’s capacity for capital formation, as it aims to partner with the private sector and also grow government revenues.

Analysts at Cordros Securities, in a report titled, “Heightened uncertainties amid great policy unwind,” noted that while emerging (EM) and Frontier (FM) markets had been rattled by the impact of policy normalisation and inflationary pressures occasioned by the Russia-Ukraine conflict, the performance of the Nigerian financial market was relatively strong, stressing that the volatility in the Fixed Income (FI) market has also been uncharacteristically muted

The report stated the fixed income market return settled at +eight per cent, which was below the return in the prior year (H1’21: 10.1per cent), but was a stark difference from the market performances in peer countries, where investors significantly reduced exposure to risk assets as central banks across the globe raised benchmark interest rates in response to spiralling inflation “

On its projection, analysts at Cordros Research said:”We expect investors to trade cautiously in the week ahead as they anticipate the H1’23 earnings season. Notwithstanding, we reiterate the need for taking positions in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.”