Investors who have endured long periods of bearish sentiments on the Nigerian Exchange Limited (NGX) had cause to smile as their wealth rose to N5.3 trillion in the first six (H1) of 2023 amid audacious macroeconomic reforms by the new Bola Tinubu administration.
This came about despite the rising inflation, social unrest, global uncertainty and other economic challenges which surely had an impact on the market during the early part of the year. The market has rallied amid buying interest from investors, especially in bellwether stocks.
For instance, the NGX All Share Index (ASI), an indicator which is used to measure the performance of listed firms on NGX, hit a 15-year high for the first time since 2008 and crossed 60,000 index points, to close at 60,968.27 points as against an opening value of 51,251.06 (January 3, 2023), implying an increase of 8,717.21 or 18.96 per cent.
Similarly, the market capitalization of listed companies, which had opened the year at N27.915 trillion, closed on Friday, June 30 at N33.197 trillion, representing a gain of N5.3 trillion in six months (H1) of 2023.
Reacting to the performance of the market, operators oted that the policies of the new administration under President Bola Tinubu which includes the harmonization of different exchange rates and the floating of the Naira at the Investors and Exporters window had led to the rise in the fortunes of investors.
It will be recalled that the persistent cash crunch, soaring inflation and the uncertainties in the build-up to the 2023 elections dampened the mood of investors as they activated the “cautious attitude” to stock trading. But sentiments started improving as the cash crunch eased and impressive corporate results came in.
Speaking to Daily Sun on telephone, Vice Chairman at Highcap Securities, David Adonri, said the audacious macro-economic policy moves which President Bola Tinubu took immediately after the swearing in, led to the massive recovery in the market.
“Those sentiments together with the usual half-year effects, when portfolio managers usually rebalance their portfolios, usually orchestrate extra demands in the equities market. Hence, I would say that it was sentiment-driven and not fundamentals of the economy or the market itself”, Adonri explained.
He noted that for the market to sustain the bullish trend in H2 2023, the macro-economic policies of the current administration must translate into concrete improvements of the fundamentals of the economy and of the market itself.
He said,“If the sentiments translate into improved macroeconomic fundamentals, then of course, we would have sustenance of the market in the second half. But if there is no translation to improve fundamentals, then of course, there would be a correction in the equities market to purge the market of the sentiments that have driven it in the first half”.
For his part, the Chief Relationship Officer, Foresight Securities and Investments Limited, Charles Fakrogha, said the smooth transition of power alongside bold reforms led to the rise in market capitalization. He also noted that the huge volumes of shares traded recently meant foreign investors might be thinking about making a comeback into the equities market.
Fakrogha, however stressed on the need for the present administration to establish a cabinet and forge ahead with its plans for the nation as this will stimulate activities in various sectors of the economy and revive the capital market.
(THE SUN)
