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By Chinwendu Obienyi and Chukwuma Umeorah
With the Naira achieving rate convergence, Nigerian stock market continued to surge to its highest level, hitting 15.8 per cent at the close of transactions on Wednesday.
The Naira official rate, via the Investors and Exporters’ (I&E) window, had closed at N756.61/$1 on Tuesday on the back of recent reforms taken by the Central Bank of Nigeria (CBN).
The CBN had lifted restrictions on FX withdrawals from domiciliary accounts and made operational changes to the FX market last week. This resulted in the FX market experiencing volatility on resumption of activities on Monday, as the Naira which opened at N663/$1 closed at N770/$1 while it appreciated against the US Dollar at the parallel market, trading at an average rate of N759/$1.
This represented a decrease of 0.26 per cent compared to the previous day’s trading session, where the dollar traded at N757/$1. However, the naira which opened at N756.61/$1, closed the day’s trading at N763.17/$1, according to data obtained from FMDQ’s website, while closed at N765/$1 at the parallel market from N760/$1 sold on Tuesday.
This development resulted to the surge in investors’ appetite for stocks as their interest in BUA Cement, Dangote Cement and Stanbic IBTC led to a 0.36 per cent gain in the NGX All Share Index (ASI) while market capitalization gained N116 billion to close at N32.302 trillion.
As a result of this, the market’s year-to-date (YTD) return, increased to 15.75 per cent. The total volume traded increased by 9.2 per cent to 643.03 million units, valued at N6.11 billion, and exchanged in 7,806 deals as against 588.85 miilion units valued at N8.96 billion which exchanged hands in 8,273 deals in the previous trading session.
Further analysis of the market’s performance showed that the Insurance (+1.9 per cent), Industrial Goods (+1.8 per cent), and Oil & Gas (+1.8 per cent) indices posted gains, while the Banking (-0.6 per cent) and Consumer Goods (-0.1 per cent) indices declined. On the activity chart, GTCO led the volume and value charts with 44.86 million units traded in deals worth N1.44 billion.
Universal Insurance followed with 141.34 million units valued at N350.88 million while Japaul Gold sold 37.68 million units worth N232.80 million.
Reacting to the development, Cordros Research in their note for the week, said bargain-hunting activities are expected to happen in market’s proceedings for the week owing to the CBN’s reforms.
“We expect the market’s proceedings to be tempered by bargain-hunting activities from “early bird” investors ahead of the H1 2023 earnings season. Overall, we reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings”, they said.
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