Stock Market Gains N7.1tn in Seven Months Amid FX Reforms

Kayode Tokede

Long-term investors in the Nigerian Exchange Limited (NGX) are reaping benefit of their investment as the stock market continued its positive trend in the first seven months of 2023, gaining N7.1trillion in market capitalisation amid the new government economic reforms on foreign exchange that have triggered buying interest in fundamentals stocks.

The market capitalisation in the first seven months gained N7.1 trillion or 25.4per cent when the stock market opened for trading at N27.915 in 2023, to close at N35.011 trillion.

In July, the market capitalisation gained N1.81trillion or 5.46 per cent to N33.198 trillion the stock market opened for trading.

Also, the NGX’s All-share index (ASI), an indicator used to measure the performance of listed firms on NGX, hit a 16-year high for the first time since 2008, to close at 64,337.52 yesterday.

In its year-till-date (YtD), it gained 13,086.46basis points or 25.5per cent from 51,251.06 basis points the stock market opened for trading this year from July, ending 64,337.52basis points

Consequently, it opened July 2023 at 60,968.27basis points, appreciating by 3,369.25 basis points or 5.53per cent to close July ending at 64,337.52basis points.

Given the outcome of the Monetary Policy Committee (MPC) meeting in the month under review, the prevailing mixed economic data and as well more corporate earnings now looking up, analysts believed that positive earnings surprises and possible interim dividend declarations from companies would spur increased bargain-hunting activities on the bourse.

In their contribution, analysts at Cordros Research stated: “In the medium term, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed-income market.”

The stock market gain in the first seven months of 2023, was on the backdrop of rising inflation rate, Monetary Policy Rate (MPR) hike to 18.75 per cent, among other macroeconomic challenges.

Since the beginning of the year, the stock market has witnessed an unprecedented rally and buying interest, especially in the financial services, consumer and industrial goods sub-sector, which has continued to trigger massive bargain hunting in large company shares.

Its performance so far reflected better-than-expected corporate earnings by listed companies and it has improved liquidity.

The Vice President of Highcap Securities, David Adonri, said the monumental stock market gain in seven months of 2023, was driven majorly by sentiment arising from the smooth handover and President Bola Tinubu’s economic policy on foreign exchange.

According to him, “His prompt change of security chiefs also boosted investors’ confidence. The removal of Godwin Emefiele as CBN governor was another issue.  All these added to the usual end-of-quarter rally to propel the equities market.

“Since the huge gain was propelled by investor sentiment, interest in equities in H2, 2023 can only be sustained if the policy changes translate into growth in corporate fundamentals and a fall in interest rate, otherwise, we might see a market correction that may purge equities off the sentiment that inflated it in seven months of 2023.”