NGX withstands investors’ shift to fixed income securities
The stock market of the Nigerian Stock Exchange had a wrap in a positive note despite investors’ aggressive profit-taking to celebrate Christmas and Happy New Year.
Closing positive means the local market investors opted to invest in active companies despite investors divesting to fixed income instruments depressed in 2020.
The market witnessed an upward trajectory in 2021 amidst strong performance by some fundamental stocks amid a shortage of dollar and double-digit inflation.
Analysts hinted that the recent federal government Bond, Nigeria Treasury Bills (NTB) and Open Market Operation (OMO) auctions have seen yields track higher and this has affected the stock market.
The market in 2021 has witnessed mixed trading, dropping by 3.04 per cent the first three months and dropping further by 5.87 per cent in the first half year.
The NGX All Share Index, which tracks the general market movement of all listed stocks shed 0.12 per cent to close nine months at 40,221.17 basis points from 40,270.72 basis points at which it opened trading for 2021.
In its Year-till-Date performance as at December 17, the stock market has appreciated by 5.17 per cent to close at 42.353.31 basis points as analysts are optimistic that the market going to close at positive territory this year.
The stock market in 2021 continued on its demutualisation as NGX group listed a total of 1,964,115,918 shares at of 50 kobo each at N16.15 per share, creating room for public to have access to its shares and to further deepen liquidity in the capital market.
Amid this, the stock market in 2021 has witnessed foreign investors exit, double-digit inflation rate and investors renewed interest in money market instruments, as value of NGX top 10 highly capitalised stocks dropping by N474.95billion in nine months, findings revealed.
The blue chips companies on NGX have maintained stronger earnings and interim dividend pay out to investors but domestic and global economy challenges over COVID-19 virus existence created room for sentiment trading.
In the year under review, the stock market has witnessed foreign investors exit in a deal worth N173.32billion as at October 2021 as against N391.98billion in 2020. Foreign investors’ inflow as at October was N156.30billion while inflow in 2020 was at N200.59 billion
Domestic investors all through the year dominated the stock market trading 78.66 per cent as against foreign investors 21.34 per cent as at October out of deal worth N1.54trillion.
In 2022, all eyes will be on policy reforms by Director General, Securities & Exchange Commission (SEC), Mr. Lamido Yuguda; Group Chief Executive Officer of Nigerian Exchange Group Plc, Oscar Onyeme, and other capital market stakeholders to witness more listing, drive liquidity and attract foreign/ local investors to the market.
Activities such as Nigerian businessman, philanthropist, Femi Otedola mop-upping of the shares of FBN Holding, one of Nigeria’s tier one banks, Flour Mills buying stake in Honeywell, MTN public offer and federal government bonds taking over listings on the bourse were key notable events on the NGX in 2021 and the trend is expected to drive activities.
Access Bank is 2022 expected to complete its Holding structure and decision taken by Dr. Herbert Wigwe and the board of the pan-African financial crucial to the capital market in 2022.
The Central Bank of Nigeria (CBN) granting Airtel Africa and MTN Nigeria approval in principle for Payment Service Bank (PSB) licenses expected to boost the two telecommunication presence in mobile money operations and drive competition.
Eyes will be on Aliko Dangote’s companies, Managing Director of MTN, Mr. Karl Toriola; Managing Director and Chief Executive Officer of Airtel Nigeria, Segun Ogunsanya; Group Managing Director/Chief Executive Officer, Mr. Omoboyede Olusanya, Flour Mills of Nigeria and FBN Holdings, GMD, Mr. Nnamdi Okonkwo who is expected to resume duty 2022.
However, in 2022, analysts have opted that the stock market going to depreciate amid post-election year, attributable to foreign investors exiting the market over uncertainty.
Recall that in 2018 post-election, the stock market closed negative, dropping by 14.87 per cent to close at 32,228.77 basis points to highlights attenuated foreign participation due to a shift to higher-yielding assets with lower risks in developed countries, coupled with the impending political risks in the Nigerian elections.
Despite the uncertainty, analysts have expressed that Zenith Bank Plc, Guaranty Trust Holdings Plc, FBN Holdings and the acquisition of Union Bank of Nigeria by Titan Trust Bank Limited (TTB), among others are the top lenders to reshape the market in 2022.
Also, the likes of cement manufacturing, oil & gas, and telecommunication companies are what investors should be looking out for in a post-election year.
The Managing Director, APT Securities and Funds Limited, Malam Garba Kurfi noted that the market in 2022 might witness listing of food and generating companies which is expected to attract investors into the market.
He added that: “I expect building materials do very well as well as Flourmill, Oil, financial and Telecommunications companies to sustain the impressive earnings.”
The vice president, Highcap Securities Limited, Mr. David Adnori said: “2022 is a year towards the elections and we are going to witness post-election syndrome that will sharpen the market.
“Insecurity will also factor the market and i do not think the price of crude will be sustained at the present high level.
“We are going to witness financial assets shifting to fixed income market considering the fact that federal government will beseech the market to raise a lot of debts.”
Analyst at PAC Holdings, Mr. Wole Adeyeye added that: “In terms of event, if there is improvement in the security in the country in 2022, this may attract foreign investors into the country.
“In addition, the stability of Naira may attract foreign investors into the country next year. Also, if the government decides to make yields on fixed income instruments unattractive in 2022, domestic investors may switch over to the equities market next year.
“In terms of company, the high cap stocks such as Dangote Cement, MTNN, among others have potentials to grow next year. This is expected to have positive impact on the performance of the Nigerian equities market in 2022. However, some foreign investors may likely exit the market in the fourth quarter of 2022 due to the coming election of 2023.”
