Stock market investors earn N15.6 trillion in six months

Despite low foreign capital exposure in the Nigerian stock market due to uncertainty, currency crisis, rising inflation and other macroeconomic challenges, investors gained N15.64 trillion in the first half (H1) of 2024.

Stock trading ended the first half of the year with noticeable optimism, helped by increased investor confidence in listed companies.

The exceptional performance marks a milestone in the history of the Nigerian Exchange Group (NGX), facing prevailing economic challenges such as elevated inflation, exchange rate depreciation and persistent security concerns.

The market capitalization increased by N15.64 trillion from N40.91 trillion at the beginning of the year to reach N56.60 trillion at the end of June 28, 2024.

Similarly, NGX Limited All Share Index (ASI) increased by 33.81% from 74,773.77 points on December 29, 2023 to 100,057.49 points on June 28, 2024.

However, the stock market recorded mixed results in the first two quarters that constituted the first half of the year. The first quarter saw an impressive return of 39.84 percent, driven by the company’s strong earnings and positive dividend announcements, and also driven by the listing of Transcorp Power Plc, a subsidiary of Transcorp Plc, while the second quarter saw a decline of 4.31 percent.

Capital market analysts said the stock market’s better performance in the first half of 2024 was due to mixed earnings for listed companies and the federal government’s reforms in the currency market.

Commenting on the market performance in the first half of the year, Vice President of Highcap Securities Limited, David Adonri, stated that investors are making transactions based on sentiment.

However, he expressed optimism that stocks can maintain positive momentum in the second half of the year due to the recapitalization of the banking sector and expected profits of listed companies, especially banks, in the first half of the year.

Arthur Steven Asset Management Limited Managing Director Olatunde Amolegbe said the expectation that government policies would encourage foreign investment inflows was a key factor driving the stock market rally in the first quarter.

“The second factor will be that some of these policies will lead to a short-term increase in inflation, and stock prices tend to rise with inflation,” he said.

Amolegbe added that there has been a demographic shift at NGX over the past few years, saying: “We now have more local institutions and retail investors in the market than foreign portfolio investors. It used to be the other way around. This shift has naturally reduced stock price volatility as locals probably have more faith in the local market than foreigners.”

Also, investment banker and stockbroker, Tajudeen Olayinka, stated that the N15.6 trillion market capitalization achieved in the first half of 2024 is indicative of the presence of huge liquid funds in the hands of institutional investors who currently dominate stock market activities.

“This is also confirmed by the fact that the future of some listed companies is brighter, so investors are positioning their portfolios for this brighter future. This is also the reason why the market remains resilient despite the high interest rate regime,” he said.

Referring to the stock market forecast for the second half of 2024, he said: “The second half of the year could be a bit challenging in terms of rapid price movements, given the catalog of offers from banks raising fresh capital to meet new capital requirements for banks.

“This will be a more balanced market where investors will exercise their rights to additional shares and/or take up new shares to maintain balance. The second half of 2024 will be interesting for the market,” he said.

Analysts at Cowry Asset Management said: “Looking ahead, the new trading quarter is expected to start strongly, albeit with mixed sentiment from market investors. The market will focus on the upcoming earnings reporting season and interim dividends from the banking sector and several other companies.

“The changing market structure on NGX continues as bargain hunters take advantage of recent pullbacks and corrections to buy value amid continued portfolio repositioning ahead of second-quarter earnings heading into the second half of the year. Investors are advised to pursue opportunities in stocks with strong fundamentals.”