NGX Emerges Africa’s Second Best Performing Stock Exchange For Half Year

The Nigerian Exchange (NGX) All Share Index (ASI) has emerged the second best exchange in Africa so far this year, which validates the magnitude of a bull run as investors are getting paid dividend

The NGX ASI index which has risen by 21.21 percent this year, is lower than Zimbabwe Stock Exchange’s ASI year to date of 116.16 percent, but higher than Lusaka Securities, 12.92 percent; Malawi Stock Exchange, 9.43 percent; Tunisia Stock Exchange, 5.86 percent, and Botswana Stock Exchange, 2.49 percent.

The Nigerian equities market sustained its bull run in the month of May as the All-Share Index (ASI) returned a m/m gain of 8.1%, higher than its 5.7% m/m return in April. This pushed the YTD gain to 25.6% in May from 16.2% in April. In the same vein, the total value traded on the local bourse increased by 195.1% m/m to N607.5bn (US$1.45bn) from N205.9bn (US$494.3m) in April, according to a report by CSL Stock Brokers.

The Bull Run is buoyed by dividend declaration that indicates cash flow stability, mergers and acquisition activities, and impressive corporate earnings as the reopening of the economy and rally in crude that gave firms the impetus to hike the price of key products.

Nestle, Seplat, Cadbury, Conoil, Dangote Cement have declared dividends so far, and investors are sanguine that more entities will be giving back to shareholders from distributable profit.

The cumulative dividends paid by Dangote Cement, BUA Cement, Zenith, Access Bank, United Bank for Africa, GTCO, MTN N, Nigerian Breweries, Nestle, Flour Mills, Dangote Sugar, and BUA foods for the year 2021 stood at N936.68 billion, according to data gathered by MoneyCentral.

Combined profit of the 30 most liquid and capitalized firms on the NGX otherwise known as NGXASI 30 increased by 34.12 percent to N823.60 billion as of March 2022, according to data gathered by MoneyCentral.

The Q1-2022 GDP figures showed that the Nigerian economy expanded by 3.1 percent y/y in real terms in what was broadly a positive surprise as the growth print topped consensus expectation even amid unprecedented developments in the global economic environment including rising inflationary pressure, higher importation costs (due disruption in the global supply chain), and geo-political uncertainties.

Interestingly, local investors drove or invigorated activity levels in the equity market, buying up most of the stocks as foreign investors dumped shares on the back of capital controls imposed by the central bank and policy unpredictability.

Domestic investors’ share of total transactions improved to 92.5% in May from 86.9% in  April (YTD–86.6%), while foreign investors’ share was down to 7.5% from 13.2% in April  (YTD–13.4%).The increase in total transaction value was broad-based as both domestic  (+214.4% m/m) and foreign investors (+67.3% m/m) increased participation level.

On the  domestic front, the increase in activity level to N562.2bn (US$1.34bn; +214.4% m/m) was  broad-based, riding majorly on increased transactions by institutional investors (+341.3%  m/m to N487.96bn; US$1.16bn), further supported by retail investors (+8.8% m/m to  N74.2bn; US$176.9m). On the other hand, Unlike in April when foreign investors reduced  their activity level (-35.8% m/m), the reverse was the case in May, as they increased activity  level by 67.3% m/m.

“Heading into the last month of H1 2022, the domestic equities market is poised to close positive as the YTD gain currently stands at 20.3%,” said analysts at CSL Stockbrokers.

“Looking into June, we expect activity level to remain high though not up to the level seen in May. Profit taking in the first half of June created an attractive entry point for investors to cherry-pick stocks as the H1 2022  earnings season draws near,” summed the analysts.