FX Convergence: MTN Overtakes Airtel Africa as Most Capitalised Stock on NGX

.Stock market gained N1.67trn in four days           

     .Market cap now N32.12trn

Kayode Tokede

As high net worth and foreign investors rushed to take position in fundamental stocks following the unification of foreign exchange by the Central Bank of Nigeria (CBN), MTN Nigeria Communication, last week surpassed Airtel Africa as most capitalised stock on the local bourse.

The telecommunication giant, according to THISDAY investigation surpassed Airtel Africa, Dangote Cement Plc, and Zenith Bank Plc as the most capitalised listed companies on the bourse as of June 16, 2023.

Specifically, MTN Nigeria gained a total of N488.51 billion in valuation in just four trading days last week when its stock gained N24 per share or 9.6 per cent to close at N274 per share from N250 per share the stock opened for trading.

Consequently, MTN Nigeria market capitalisation closed June 16, 2023 at N5.577 trillion, contributing 17.36 per cent of the N32.126 trillion overall stock market capitalisation.

Notably, the market capitalization of Airtel Africa increased to N4.844 trillion as of the end of June 16, 2023. During the period, its stock price increased by N93.00 per share or 7.78 per cent to N1,289 per share from N1,196 per share it opened for trading.

This represents N349.51billion gain in market capitalisation by Airtel Africa in four trading days last week.

On its part, Dangote Cement maintained the third position as the most capitalised company. Its stock price added N1.00 per share or 0.35 per cent to close at N284 per share from N283 per share it opened for trading, representing an increase of N17.04billion in market capitalisation.

BUIA Foods and Zenith Bank Plc made the top five list with N105billion and N94.19 billion, increase in market valuation, respectively.

Generally, analysis of trading activity last week revealed that the stock market reacted positively to the CBN new FX policy.

At the close of trades, 15 out of the over 160 listed companies contributing about 95.58 per cent or N1.598 trillion market capitalisation in four active days of trading on the bourse last week.

The stock market last week gained N1.67 trillion in four days to close at N32.126 trillion from N30.455 trillion it opened for trading, spurred by positive investor sentiment.

The NGX All-Share Index appreciated by 5.49 per cent to close the week at 59,000.96 basis points from 55,930.97 basis points it opened for trading.

Consequently, it pushed investors’ Month-to-Date and Year-to-Date returns to 5.79 per cent and 15.12 per cent, respectively.

Notably, investors took position in fundamental stocks, most especially the banking stocks in the period under review.

For instance, the NGX Banking Index appreciated by 12.59 per cent to 592.14 basis points, followed by NGX Oil/Gas Index gained 11.95 per cent to close at 720.52 basis points.  

NGX Industrial Goods and NGX Growth, however, depreciated by 1.63 per cent and 1.07 per cent respectively while the NGX ASeM index closed flat.

 Meanwhile, with the Naira trading against the Dollar currently at N663.04/ Dollar at I & E FX window, capital market analysts have expressed that the policy by new administration continued to spur an unprecedented rally in the market.

Speaking with THISDAY, the Vice President, Highcap Securities Limited, Mr. David Adnori attributed the stock market rally to unification of the foreign exchange and fuel subsidy removal.

He said, “These two policies have awakened the fundamentals of the nation’s macro economy.  These policies are masterstroke as market stakeholders have been clamouring for it a long time. We have been clamouring for full unification of the foreign exchange so that there will be clear rates for everyone to see. With the unification of foreign exchange, we have seen the full value of Naira and if the naira is floated, it means foreign direct investors can seamlessly come-in and exit the stock market.”

On his part, the President Association of Capital Market Academics of Nigeria (ACMAN), Professor Uche Uwaleke commended the unification of exchange rates, which makes room for a more transparent foreign market.

According to him, “I think that the CBN should implement that in a way that does not cause massive distortions in the general price level. In this regard, a sudden free float of the naira is not advised given that the economic fundamentals required to support a naira float are still very weak, especially in relation to sources of foreign exchange. It’s rather early to bank on sustainable capital inflows from foreign direct investments due in partly to insecurity and the overall tough operating environment in Nigeria.”

He warned that the sudden naira devaluation might draw foreign portfolio investments, which is part of the reason the stock market is surging.

“But we also know that portfolio investments are hot money and do not represent a sustainable source of foreign exchange inflows. In consideration of this therefore, I would advise that the unification of exchange rates should not be a one-step process but should be implemented over a period of time however short it may be. Empirical evidence suggests that reforms are more successful when they are sequenced and implemented in phases.

“This is against the backdrop of the oil subsidy removal which, taken together, can result in galloping inflation and rising poverty level. So, while fiscal and monetary policy reforms are welcome, absolute care should be taken to strike the right balance and minimize their unintended consequences, ”he said.