Corporate Earnings, Others Lift Stock Market by N350bn in August

Darasimi Adebisi

Despite the economic headwinds and relative low patronage by foreign investors, the Nigerian equities market recorded improved performance in the month of August as investors’ worth appreciated by N350 billion.

Analysis of trading data for August obtained at the Nigerian Exchange Limited (NGX), revealed that the market capitalisation rose from N20.084 trillion at the end of July to N20.434 trillion in August.

Also, the NGX All-Share Index (ASI), which opened the month of August at 38,547.08 basis points, appreciated by 1.74 per cent to closed the month at 39,219.61 basis points on August 31, 2021.

Capital market operators attributed the improved performance of the market to the strong first half (H1), 2021 corporate earnings and improving macro-economic indices shown in the second quarter (Q2) GDP quarter-on-quarter growth of 5.01 per cent.

The likes of Zenith Bank, Total Nigeria Plc, among others have released half year (H1) 2021 results with interim dividend pay-out to shareholders.

The analysts added that the recovery in the country’s economic position, offering an insight into what the future holds for the stock market and economy in general.

Speaking on market performance for August, the Vice President of Highcap Securities, Mr. David Andori said the stock market regained lost ground and it replicated the recovery that started in the last quarter.

According to him, the marginal increase is a factor of released results. He explained further that the stock market is expected to maintain the same trend in September considering the fact that the macro-economy conditions are improving with increasing GDP and drop in inflation rate.

“The crude oil price is also high and government visits the market for more bond issuance, “he said.

On his part, the Managing Director, Enterprises Stockbroker Limited, Mr Rotimi Fakayejo, attributed the stock market marginal growth to improved results by listed companies.

However, he stressed that the performance of stock market in August was not encouraging despite the market closing positive, “But it a signal that the days ahead will be good and that is a positive development.

“We witnessed lower volume of transactions in August and July. The volume of transactions on NGX not encouraging because the daily average is trending towards one billion shares and 1.5 billion shares, unlike before it used to be two billion shares.”

Also speaking, the former President of Association of Securities Houses of Nigeria (ASHON), Mr. Emeka Madubuike said: “The stock market has been very unstable in August, considering the prices of listed stock on NGX dropping significantly.

“There is no specific factor contributing to the marginal increase in stock market performance. The level of uncertainty in the stock market is too high and I am surprised the market closed positive in August. The economy situation does not justify the increase in market performance last month despite growth in GDP.”

For Q4 2021, he said: “I cannot really predict how the stock market will be in last quarter of 2021 due to policy summersault.It is so tough but I think the market will be flat this year. The truth is that government after government has not believed in the stock market. So, you do not expect any policy targeted at reviving the stock market this year.

“The foreign exchange is critical component that determined how the stock market behave and foreign investors participation can be discouraged if situation on ground not friendly.”

Meanwhile, Cowry Asset Management Limited in its report titled, “Review, Outlook and Investment Strategies for H2 2021,” said: “Nevertheless, against the anticipated growth in real output, expectations of increased corporate profits and an expected moderation in fixed income yields, we expect the equities market climb northwards in H2 2021.

“Therefore, we expect investors to bargain hunt for undervalued stocks; particularly of those companies likely to sustained, and possibly increase, interim and/or final cash dividend payments.

“This will be more appropriate for investors seeking passive income on a long-term basis while having enough cash on hand for strategic investing. Active investors/ speculators should focus more on growth and high beta stocks while also looking to by the dip while having enough speculative cash on hand for tactical manoeuvres. Again, investors should be wary of those factors that could create economic headwinds and adjust their portfolios appropriately.”