By Nse Anthony-Uko
(Sundiata Finance) — Despite the highly bearish nature of the stock market at the beginning of the year, investors raked in a whopping N2.205 trillion profit in first half year.
This highly bullish turnout followed renewed demand for stocks by foreign portfolio and domestic investors on improved macroeconomic developments and supply of foreign exchange (forex).
The stock market return fully back to positive position around April, 2017 as analysts attributed the factors responsible for the appreciation in the equity market include the improvement in the first quarter, 2017 results of quoted companies compared with the corresponding period of last year and the prospect of better performance in subsequent quarters.
Other factors according to them, include the increase in the supply of foreign exchange, improved crude oil production and price, improved investors’ confidence in the Nigerian economy and the financial market, increase in the participation of both the local and foreign investors in the markets and the boost to the economy by the passage of the Petroleum Industry Governance Bill (PIGB).
The Nigerian Stock Exchange All Share Index (NSEASI), which measures the performance of the equity market appreciated by 6,242.86 points to closed at 33,117.48 on June 30, from 26,874.62 at which it opened for the year.
Similarly, market capitalisation gained N2.205 trillion, rising from N9.247 trillion at which it opened trading on January 3, 2017 to close at N11.452 trillion for the half year.
The sectoral analysis of performance of the equities market in the first six months of the year 2017 shows that the Banking sub-sector recorded the best performance, followed by Pension, NSE Premium, Industrial Goods, Consumer Goods, Insurance, NSE 30, Oil and Gas index.
The NSE Banking Index gained by 45.08 per cent, followed by Pension with a gain of 42.92 per cent, while NSE Premium went up 31.15 per cent. Other sectors that were up were, Industrial Goods, Consumer Goods, Insurance, NSE 30, Oil and Gas. The only Sub-sector of the market that was down for the period was the Alterative Market index with 1.12 per cent.
For the period under review, market breadth remained positive, with 64 gainers versus 23 losers. May and Baker led the gainers table by 312.77 per cent to close at N3.88 per share. Stanbic IBTC followed with a gain of 120 per cent to close at N33, while Fidson appreciated by 117.19 per cent to close at N2.78 per share.
On the other hand, Forte Oil led the laggards’ table by 40.70 per cent to close at N50.07 per share. Seven Up trailed with a loss of 32.98 per cent to close at N86.45, while Meyer went down by 19.54 per cent to close at 70 kobo per share.
The chief operating officer of InvestData Limited, Mr. Ambrose Omordion said that “The nation’s equity market and economy for the first half of the year was a reversal of 2016 economic and market performance as commodity price of oil in the international market moved from low of $28 in January 2016 to high of $57 in 2017 before closing the period under review at $45, the big surge recorded in crude oil price was between November 2016 and April 2017.”
According to Omordion, this improvement in oil price impacted the government revenue positively to reflect on our reserve that supported government spending. The apex bank monetary and exchange policy so far in year have been a major driver of the economic recovery through its intervention in the forex market had helped to revamp the manufacturing and other sectors productivities by meeting the supply side of the market to relatively stabilized exchange rate that had supported naira appreciation against other currencies and close the exchange gap in the black market.
“This has impacted inflation rate as it had decline for four straight moths to 16.25 per cent from high of 18.55 per cent in January 2017. The first quarter Gross Domestic Product (GDP) of negative 0.52 per cent that is moving towards green and positive economic data since CBN exchange rate policy was review in February are pointer to where the economy is heading after the market had suffered three consecutive years of down market that made equities and the market undervalued with low price to earnings. The improvement recorded in the first quarter corporate earnings have supported prices if during the recent rally.”
He however said, the delay in passage of 2017 budget and signing of the appropriation bill into law, coupled with the implementation style of the extended lifespan of the 2016 budget’s capital expenditure affected the fiscal authorities for the period under view that are expected to drive the economic recovery and growth plan agenda of the government.
The managing director of Highcap Securities Limited, Mr. David Adnori noted that the market which recorded not good performance in the first three month of the year, took a reverse in the April as the market post a growth of 15.13 per cent between April 26 and May 31, 2017
He pointed out that it was the broadly better-than-expected first quarter earnings that motivated appetite for risk in the month of April, while, equities rally was driven mainly by the sense of improving access to forex by the foreign portfolio investors through the Investors and Exporters’ (I&E) forex window, saying, also during the period under review, the report that Pension Commission (PENCOM), the apex regulator of the Nigerian pension fund administrators approved the implementation of the multi-fund structure, having the potential to significantly increase local pension funds’ exposure to equities, by PFAs for RSA funds, contributed immensely to equities rally.
Outlook for second half of the year, Omordion said, in the new quarter and rest of the year, more positive economic data are expected, especially inflation figure for June, Purchasing Managers Index (PMI) and second quarter GDP to really confirm the level and stage of economy recovery, saying that the performance of the equities market will remain largely driven by the positive macroeconomic developments and companies financial performance.
Stock Market Investors Reap N2.2trn Half-year Gain
By Nse Anthony-Uko