As Nigeria continues to grapple with economic challenges, the equities market has maintained a downward slide with investors’ wealth dwinddling by a whopping N1.69 trillion in just three months.
Analysis of market activity from June to August 2022 revealed that in August, the stock market depreciated by N283billion in market capitalisation, while in July, the market capitalisation went down by N772 billion as investors moved to fixed income market that comes with low-risk investment and modest yield, yet above the inflation rate.
The stock market had depreciated by N632.23 billion in June to N27.94 trillion in market capitalisation.
In terms of tracking the general market movement of all listed equities on NGX, including those listed on the Growth Board, regardless of capitalization, the stock market in August dropped by 1.06 per cent to close at 49,836.51 basis points amid investors’ sentiments.
According to THISDAY findings, the stock market indicator, the NGX All-Share Index depreciated by 2.79 per cent in June 2022 to close at 50,370.25 basis points and in July, dropped by 2.79 per cent to close at 51,817.59 basis points.
Coming into the year, the major concern for global economic growth was the emergence of new strains of the Covid-19 pandemic. However, the war between Russia and Ukraine which posed new supply constraints further restrained growth.
The stock market between June and August 2022 battled hike in the inflation rate (19.64 per cent as of July 2022).
Also, Central Bank of Nigeria (CBN) increase in its Monetary Policy Rate (MPR) to 14 per cent and a scarcity of foreign exchange led to the outflow of foreign investors.
To buttress this point, foreign investors’ outflow on the floor of the NGX grew by 11.4 per cent Year-on-Year (YoY) to N138.97 billion in seven months of 2022 from N124.75 billion reported in seven months of 2021.
The domestic/foreign investors’ profit-taking in Dangote Cement Plc, BUA Cement Plc, Nestle Nigeria Plc, Zenith Bank Plc, among others stocks impacted negatively on indices on the NGX.
For instance, Dangote Cement dropped by 11.6 per cent to N245 per share as of August 2022 from N277.00 it opened for trading in June to dragged the NGX Industrial index down to 1,777.14 basis points from 2,194.24 basis points it opened for trading in June.
BUA Cement also depreciated to N52.00 per share as of the closing of the market in August from N74.25 it opened for trading in June.
The Banking Index dropped by nearly nine per cent to 387.41 basis points as of August from 425.71 basis points the stock market opened for trading in June.
Profit-taking in Zenith bank dragged its stock price to N21.90 as of August from N23.45 it opened trading in June, while the Guaranty Trust Holding Company (GTCO) Plc dropped to N19.85 per share as of August from N22.55 it traded three months ago.
Nestle Nigeria depreciated to N1,350 per share as of August from N1,400 per share to down NGX Consumer Goods Index by 7.85 per cent to 600.56 as of August 31, 2022 from 651.73 basis points it closed for trading in May 2022.
In addition, profit-taking depreciated the NGX Oil & gas sector by 532.15 basis points as of August from 547.57 basis points it opened for trading in June 2022.
The stock market, thus, maintained positive performance in its Year-till-Date performance, gaining 16.67 per cent in eight months of 2022, driven by some fundamental stocks with impressive corporate earnings.
Capital market analysts expressed that the hike in interest rate and Nigeria’s inflation rate, which has surged to its highest level in more than 16 years, is putting a damper on stock returns as interest rate hikes brightens prospects of the fixed income market.
Nigeria’s high-interest rate environment aimed at reducing inflation continues to make fixed income securities more attractive at the expense of stocks.
Thisday