H1: NGX ASI shed 5.87 per cent as investors lost N1.297trn

Despite been named the best-performing stock market among the 93 other equity indexes across the world in the year 2020, the Nigerian Stock Exchange (NSE), now Nigerian Exchange Limited (NGX), over there past six months has shed 5.87 per cent.

The positive sentiments that pervaded the equities market in the second half of 2020 extended into the early part of the year 2021, however, it was short-lived as an earlier-than-anticipated reversal in the yields on fixed income (FI) instruments dampened appetite for stocks.

The NGX All-Share Index, which tracks the general market movement of all listed equities shed 5.87 per cent to close H1 at 37,907.28 basis points from 40,270.72 basis points it began the year with.

Similarly, the market’s worth reduced to N19.760 trillion after the value of listed companies’ outstanding shares lost N1.297 trillion, compared to the opening value of N21.057 trillion on January 4, 2021.

Across the major sectoral indices, performance was negative during the first half of the year 2021. NSE Industrial Goods, Banking, Lotus II, NSE 30 and Consumer Goods indices closing in negative territory with a loss of 8.09 per cent, 6.92 per cent, 5.53 per cent, 3.78 per cent and 0.31 per cent, respectively. On the other hand, NSE Pension, Insurance and Premium indices recorded a year-to-date gain of 5.18 per cent, 5.15 per cent and 1.38 per cent as of June 25, 2021.

Ambrose Omordion, Chief Research Officer of Investdata Consulting Ltd noted that the nation’s equity market has been oscillating as a result of many factors ranging from rising inflation regardless of slowing down in the last two months, rising yields in the fixed income space, recovering oil price in the international market as it now trades above $73 per barrel.

“This is not minding that the increase is not reflecting on the nation’s foreign reserves, just as other factors such as the improving earnings during the recession and post-recession, relatively higher dividend payout, weak and mixed macroeconomic indices and security challenges, Omordion said in a report.

According to Nigeria Exchange Group’s data, the value of transactions executed by domestic investors declined by 58.4 per cent to N76.90 billion as of May 2021 from N184.91 billion in January 2021. On the other hand, foreign investors continued to exhibit apathy towards the local bourse due to lingering liquidity constraints in the FX market and protracted delays in implementing structural reforms.

Accordingly, foreign investors have remained net sellers of Nigerian equities, as the total outflows of N107.22 billion for January to May 2021 outstripped inflows of N91.32 billion during the same period. Also, the foreign investor share of transactions fell to 17.5 per cent as of April 2021, the lowest since the NGX began compiling the current data series.

Reviewing the local bourse in H1, 2021, analysts at Cordros Capital Limited said following an impressive start to the year wherein the ASI gained 5.3 per cent in January, domestic investors have sold down equity investments in reaction to the rapid yet expected changes in yields in the FI market.

Analyst at PAC Holding attributed the equities market decline in the first half of 2021 to profit-taking from the gains recorded in 2020, drop-in foreign portfolio participation and migration of local investors to fixed income market as most local investors who bought stocks at lower prices in 2021 exited their position in H1, 2021.

However, they believe that the market may likely see a reversal of the bearish trend in the second half of 2021 as investors are expected to take advantage of undervalued stocks and position themselves for interim dividend payments.

Cordros Capital, giving an outlook said despite the yield retracement in the FI market, “we do not think investors should give up on the possibility of a market rally in the second half of the year as we still see scope for positive market performance.

“Our view is underpinned by prospects of improved macroeconomic conditions which will enhance corporate earnings; the possible return of FPIs, who have been net sellers of Nigerian equities thus far; interim dividends that accompany the Q2 earnings season, and stock-specific events such as GTB’s implementation of a holding company structure and the likelihood of the second tranche of share buy-back by Dangote Cement.”

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H1: NGX ASI shed 5.87 per cent as investors lost N1.297trn