Investors Raise Stakes On Equities By 34.6% To N2.08trn

Investors have staked about N2.08 trillion on Nigerian equities in the past 10 months, an increase of 34.6 per cent over the corresponding period of 2021.

Trading data at the Nigerian Exchange (NGX) for the 10-month period ended October 31, 2022 showed that total turnover stood at N2.08 trillion in 2022 as against N1.545 trillion recorded in corresponding period of 2021.

The improvement in market turnover was driven mainly by increased activities by domestic investors, especially institutional investors. Total transactions by domestic investors in the past 10 months jumped by 42.3 per cent from N1.215 trillion by October 2021 to N1.73 trillion by October 2022. These indicated that the proportion of domestic investors’ trading to total trading turnover increased from 78.66 per cent in 2021 to 83.19 per cent in 2022.

Retail domestic investors accounted for N580.83 billion in 2022 as against N494.87 billion in comparable period of 2021. Retail institutional investors’ turnover rose by 59.4 per cent from N720.34 billion in October 2021 to N1.15 trillion by October 2022.

While total transactions by foreign portfolio investors improved from N329.62 billion in first 10 months of 2021 to N349.59 billion in first 10 months of 2022, the proportion of foreign transactions to total market transactions dropped from 21.34 per cent in 2021 to 16.81 per cent in 2022.

Pricing trend analysis had shown that investors in Nigerian equities lost about N2.8 trillion in October 2022 as massive selloffs across the sectors pushed most stocks to lower prices.

Benchmark indices at the stock market had shown an average loss of 10.576 per cent for the immediate past month, equivalent to net capital depreciation of N2.797 trillion, its worst performance in recent months.

The massive loss in October exacerbated the downtrend at the stock market, cutting down average year-to-date return from 14.77 per cent by September 2022 to 2.6 per cent in October 2022. Nigerian equities had closed the third quarter ended September 2022 with net capital gain of about N3.3 trillion for the nine-month period.

The performance in the immediate past month had fuelled anxieties that the Nigerian market might be on a downspin to its first loss in three years. The market had lost an average of 1.63 per cent or N430 billion in September 2022, following same trend in previous months. The market had lost about N28.3 billion in August and depreciated by N772 billion in July.

The All Share Index (ASI)- the common value-based index that tracks all share prices at the Nigerian Exchange (NGX) declined by 10.58 per cent to close October at 43,839.08 points as against 49,024.16 points recorded at the beginning of the month.

Also, aggregate market capitalisation of all quoted equities dropped from its month’s opening value of N26.451 trillion to close October 2022 at N23.878 trillion, a face value loss of N2.57 trillion but a real adjusted loss of N2.797 trillion.

The difference between the ASI and aggregate market value was due mainly to the listing by introduction of Geregu Power Plc, which led to primary increase in number and value of outstanding shares at the Exchange.

The decline in October was worsened by steep depreciation in the share price of Airtel Africa Plc, Nigeria’s stock market current most capitalised stock.

Investors in Nigerian equities had lost about N1.50 trillion in the third quarter as escalated global energy and commodity crises triggered massive portfolio realignments across markets.

Benchmark indices at the Nigerian stock market closed third quarter with average negative return of 5.39 per cent, equivalent to net capital depreciation of N1.50 trillion for the three-month period.

The ASI had closed at 49,024.16 points as against 51,817.59 points recorded at the beginning of the quarter while aggregate market value of all quoted equities dropped from third quarter’s opening value of N27.935 trillion to close at N26.451 trillion, a decrease of about N1.50 trillion. The almost perfect correlation between market capitalisation and ASI underlined that the depreciation was mainly due to decline in share prices rather than primary market changes such as reduction in number of shares.

Nine-month segmental analysis had shown no safe haven for investors during the period. All sectoral indices closed negative, driven by selloffs within the large and mid-cap stocks. The NGX 30 Index- which tracks the 30 largest stocks at the NGX, posted average loss of 7.45 per cent in the third quarter. The NGX Banking Index- the most active index, declined by 4.67 per cent.

Also, the NGX Insurance Index, the most populous index, dropped by 5.46 per cent during the period. The NGX Industrial Goods Index recorded the highest decline of 17.61 per cent within the three-month period. The NGX Oil and Gas Index depreciated by 6.80 per cent in third quarter 2022. The NGX Consumer Goods Index declined by 6.30 per cent. The NGX Pension Index, which tracks stocks in line with the stringent pension funds’ investment guidelines, depreciated by 9.00 per cent while the NGX Lotus Islamic Index- which tracks equities that comply with the more stringent Islamic investment rules, declined by 6.51 per cent in the third quarter.

Analysts attributed the market performance to the worsening domestic and global economic risks characterised by rising inflation and higher interest rates.

Most analysts remained cautious of the outlook in the months ahead citing worsening economic fundamentals and political risks.

They noted that the local bourse will remain lull and broadly bearish as the prospect of even higher interest rates and the depressed exchange rate weigh on investor sentiments in the medium term.

Chief Executive Officer, Wyoming Capital and Partners, Mr. Tajudeen Olayinka attributed the decline in market performance in October 2022 to economic headwinds and Airtel Africa Plc’s price correction.

According to him, economic headwinds and Airtel Africa’s price correction were both responsible for the loss seen in October.

“We are actually in a period of prolonged repricing of securities across markets and instruments, due to multiplicity of factors. We expect recovery to begin to take place once economy begins to look more prosperous or stable.

“For those who may wish to invest on long-term basis, the future starts today. For those who may wish to speculate for short-term benefits, they’ll need to exercise caution, as the downside risk is not completely out yet. On a balance of probability, however, prices appear good and reasonable for long-term horizon,” Olayinka said.

Executive Vice Chairman, Highcap Securities Limited, Mr. David Adonri also attributed the decline in stock market to profit-taking in Airtel Africa.

He also noted that the political environment was impacting the market pointing out that right from the penultimate year to the election period, the socio-political atmosphere has become charged with politicians resorting to violent rhetoric and divisive tactics, which deepened the country’s socio-political fault lines.

“During this period, the economy becomes overloaded with money arising from excessive election spending, which spikes inflation.

“Historical antecedents indicate that on average, both equities and bonds show positive or negative performance in the penultimate year and immediately after the election.

“While the drama of general elections can make your imagination run wild, what you need to watch out for is how the unfolding scenario will affect the economy, the capital market, and your portfolio,” Adonri said.

Analysts at Cardinalstone Limited, said they expected the “aversive cloud over equities” to linger longer till year-end citing aggressive monetary rhetoric, bandwagon effects and election-related fears.

“Notwithstanding the possibility of more market churn, we maintain that this bearish iteration presents attractive but disciplined re-entry opportunities for long-term investors,” Cardinalstone stated