BY BAMIDELE FAMOOFO
Domestic investors continue to dominate activities in the Nigerian stock market as total investment in equities stood at N1.4 trillion in the half year ended June 2022.
International (foreign) investors on the other hand only placed N243.5 billion on stocks listed on the bourse in the same period.
Domestic investors’ participation in the equities market was primarily driven by domestic investors.
According to NGX data on foreign and domestic investor’s participation in the equities market at the end of June 2022, the breakdown of the market participants in the period under review shows domestic investors have primarily driven the market with 85.3 percent of total transactions, leaving foreign investors with 14.7 percent of total transactions in H1-2022.
Analysing the activities of foreign equity investors along equity inflows as against equity outflows line shows a net outflow of N2.5billion, following total inflows of N120.5billion compared with outflows worth N123.0billion at the end of H1-2022.
As noted by analysts at United Capital Plc, in H1-2022, investors witnessed major global stock markets plummet on the back of crystallisation of policy normalisation risks as global monetary policy authorities scramble to stem surging inflationary pressures.
“For example, in H1-2022, the MSCI World Index lost 21.2%. However, the Nigerian equities market has taken a divergent stance from the global market as the NGX-All Share Index (NGX-ASI) kicked off 2022 with strong bullish momentum,” analysts hinted.
“For example, in H1-2022, the MSCI World Index lost 21.2%. However, the Nigerian equities market has taken a divergent stance from the global market as the NGX-All Share Index (NGX-ASI) kicked off 2022 with strong bullish momentum”
Meanwhile, in H1-2022, the NGX-ASI gained 21.6 percent, soaring past 50,000 points for the first time in 14 years, printing at 51,962.9 points at the end of the period. The rally in the equities market was underpinned by several factors combining to lift investor sentiments.
At the start of the year, investors’ interest in the equities market was first propelled by expectations of a strong FY-2020 earnings performance. The rally in crude oil prices provided a further boost for upstream oil & gas stocks while investors jumped into a frenzy following the listing of BUAFOODS on the stock exchange. All these factors propelled the equities market higher in the first quarter of the year.
In Q2-2022, investors remained upbeat regarding Nigerian equities as listed corporates continued to weather the storm of a hostile operating environment to post solid profit growth. Further aiding the upbeat investor mood, the yield environment remained broadly unattractive as sovereign debt managers’ financial repressive tactics ensured movement in interest rates were capped. Thus, given the -interest rate environment, investors continued to build equity positions on solid Q1-2022 earnings outings.
Accessing sectorial performance reflects the clear value drivers for equity investors in H1-2022. The Oil & Gas sector closed the period as the best performing sector, with the NGX Oil & Gas index gaining 58.1 percent. The strong performance from the sector reflects the strong gains recorded in crude oil prices, benefitting upstream oil & gas companies like SEPLAT (+100.0% in H1-2022).
In addition, strong earnings outing and dividend announcement from CONOIL (+30.9% in H1-2022) contributed to the gains in the sector. The Industrial Goods and Consumer Goods sectors also closed in the positive as most cement, FMCGs, and brewers rode on the back of surging inflation to raise prices, boosting revenue. Buying interest in counters like DANGCEM (+7.0% in H1-2022), WAPCO (+10.2% in H1-2022), GUINNESS (+132.1% in H1-2022), CADBURY (+96.0% in H1-2022) and NB (+17.6% in H1-2022) drove the NGX Industrial and Consumer goods indices higher by 7.2 percent and 5.9 percent respectively. The telecoms sector was another upbeat sector propelled by sustained growth in earnings from MTNN (+16.8% in H1-2022) and AIRTELAFR (+81.4% in H1-2022).
Conversely, the financial services sectors recorded a lacklustre performance in H1-2022. First, the Insurance sector lost 10.0 percent in H1-2022 on the back of sell pressures in MANSARD (-13.8% in H1-2022) and AIICO (-8.6% in H1-2022). Similarly, the Banking sector lost 2.0 percent following selloffs in GTCO (-21.2% in H1-2022) and ZENITH (-13.7% in H1-2022). Across the sectors, regulatory constraints and a weaker interest rate environment were key dampeners of investor sentiment toward the financial services sector.
