*Dangote Cement, BUA Foods buoy performance
*Increased liquidity responsible for massive gains, experts say
Global equities suffered their biggest decline in more than a year last week, as heavy losses in Netflix shares accentuated a sell-off in tech stocks that spilled into other sectors. But in Nigeria, it was the opposite, as the market capitalisation of the Nigerian Exchange Limited (NGX) appreciated remarkably by 11.05 per cent or N2.46 trillion in the first three weeks of trading in 2022.
Precisely, the market capitalisation of the NGX opened in 2022 at N22.297 trillion, and closed last Friday at N24.761 trillion, while the NGX All-Share Index (NGX ASI) grew by 7.6 per cent or 3,240.91 basis points to 45,957.35 basis points, from the 42,716.44 basis points it opened this year.
The NGX ASI last week reached highest level since January 19, 2018, when it hit 45,092.83 basis points.
The stock market in the first trading week kicked off on a strong note, gaining N1.33 trillion in market capitalisation. In the second trading week, market capitalisation gained N323 billion week-on-week to close at N23.951 trillion from the N23.628 trillion it had opened for trading.
Market analysts attributed the strong rally in the market to improvement in the economy, boost in liquidity, as well as investors’ renewed interest in the stock market.
Notably, price appreciation in BUA Foods, BUA Cement Plc, Seplat Energy Plc, Airtel Africa Plc, Dangote Cement Plc, among others, sustained gains recorded in the first three weeks of trading on the NGX, as investors took position on companies with strong fundamentals in anticipation of the release of their 2021 audited financial results and dividend pay-out.
BUA Foods was the most appreciated stock on the Exchange, gaining 61 per cent to close at N64.4 per share, from N40 per share it was when it was listed this year. This was followed by Airtel Africa that has so far gained 21 per cent to close at N1, 155.50 per share, higher that the N955 per share it opened for trading.
Similarly, the stock price of Dangote Cement added nearly 11 per cent to close last week at N284.9 per share, up from the N257 per share it opened in 2022, while Lafarge Africa Plc rose by 6.1 per cent to close at N25.4 per share, up from N23.9 per share.
Seplat was one of leading stocks on the Exchange, gaining 16.2 per cent to N755.1 last week, from N650 per share it opened for trading, just as BUA Cement gained 6.5 per cent to close at N71.4 per share, from N67.05 the market opened this year.
In the same vein, Zenith Bank’s stock rose by 2.59 per cent to N25.80, up from N25.15, and FBN Holdings gained 5.3 per cent to N12, from N11.40, both lifting the NGX banking index by 3.22 per cent to close last week at 419.14 basis points.
The NGX Oil & Gas and Industrial Good indices led others, gaining 9.90 per cent and 8.45 per cent, respectively, in year-to-date (YTD) performance, as Consumer Good recorded a decline of 4.21 per cent YTD growth.
It was investors bargain hunting in BUA Foods, Dangote Cement, Guinness Nigeria, and International Breweries, which drove the weekly gains.
In early January 2022, BUA Foods was approved by the management of the NGX to list on the Main Board a total of 18 billion units at N40.00 per share and Dangote Cement announced the commencement of the second tranche of its share buyback programme. The cement manufacturing company said it would be repurchasing 170 million ordinary shares of 50 kobo each, representing one per cent of the company’s issued shares.
According to the company, this includes 40.2 million shares held as treasury shares, following the conclusion of Tranche I of the share buyback programme. It said the transaction would take place at the open market on the NGX, subject to prevailing market conditions and under the current daily trading rules of the Bourse.
However, Vice President, Highcap Securities, Mr. David Adnori, noted that increase in macroeconomic activities as well as liquidity following a successful bid in bond market in December boosted the stock market lately.
According to Adnori, “Towards the end of 2021, a lot of investors subscribed to the debt market and it was oversubscribed. Some of those funds are now being invested in the stock market, a major reason we are witnessing appreciation in market performance.
“Also, we have seen activities that have attracted investors into the stock market. The BUA Foods listing, the transactions by Airtel in East Africa, and Dangote Cement share buyback have impacted on the market in the last three weeks.
“Overall, the market is driven by information regarding anticipation towards 2021 full year results and accounts. Investors are investing in stocks with good fundamentals and dividend paying stock on NGX.”
On his part, Chief Executive Officer, APT securities & Funds Limited, Mallam Garba Kurfi, attributed the growth to various activities by listed companies on the NGX.
Kurfi said, “We have seen the issue of Dangote Cement share buyback, the BUA Foods listing. We have also seen many investors trying to balance their portfolio and it has contributed to the volume of transactions recorded in the last three months.”
Analysts at Cordros Capital, however stated, “In the week ahead, we believe investors will be focused on the outcome of the monetary policy committee (MPC) meeting to gain further clarity on the movement of yields in the fixed income market.
“Consequently, we expect a ‘choppy theme’, as cautious trading will likely dominate the market. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks, as the weak macro story remains a significant headwind for corporate earnings.”
According to the Financial Times, investors have raced out of speculative corners of the US market, as the Federal Reserve moves to tighten financial conditions. It reported that share decline had been particularly extreme in the US, where many of last year’s high-flying tech companies were listed. The tech-heavy Nasdaq Composite index fell 7.6 per cent this week, its biggest slide since the coronavirus pandemic rocked US financial markets in March 2020.
The blue-chip S&P 500 index, the closely followed barometer of the $50 trillion US stock market, shed 5.7 per cent over the past week. More than two-thirds of the companies within the index are now in a technical correction — or down at least 10 per cent from their record high — including 149 stocks that declined 20 per cent or more.
The FTSE All-World index of developed and emerging market shares has fallen 4.2 per cent since last Friday, recording its steepest weekly decline since October 2020.
Among the hardest hit US stocks was Netflix, which tumbled 22 per cent on Friday after the streaming group warned subscriber growth would slow substantially. The decline shaved about $49bn from its valuation, or roughly the market capitalisation of foods group Kraft Heinz.