By Chinwendu Obienyi and Chukwuma Umeorah
Trading activities at the floor of the Nigerian Exchange Limited (NGX) ended the month of August in the negative territory as the fortunes of investors fell by N283 billion.
Data compiled by Daily Sun showed that the market capitalisation of the domestic bourse in August which opened trading at N27.163 trillion closed the month at N26.880 trillion due to persistent sell-offs of securities amid inflation and scarcity in FX.
Also, the All Share Index (ASI) – total market (broad-base) index, reflecting a total picture of the behaviours of quoted shares on the NGX which opened the month at 50,370.25 points, closed at 49,836.51 points, representing a 1.06 per cent decline month-on-month (MoM) despite a 0.39 per cent gain recorded on the last trading day.
Further analysis of the market showed that the NGX 30, NGX Banking, AFR-ICT index, recorded declines while the NGX Insurance, Consumer Goods index, Industrial Goods index recorded marginal gains in the month under review.
Reacting to the performance of the market, analysts noted that the fragile macroeconomic environment is affecting the sentiment of investors while adding that the FX liquidity challenge has limited inflows from investors and resulted in the market being dominated by domestic investors and foreign investors’ inability to repatriate funds, leading to the reinvestment of dividends in the market.
For instance, the total transactions by domestic investors on the nation’s bourse grew by N1.490 trillion as against N273.16 billion recorded by foreign investors in the first seven months of 2022.
According to the Domestic and Foreign Portfolio Investment (FPI) July 2022 report which captured these transactions as well as trading figures from market operators, domestic transactions stood at N1.465 trillion in the first seven months of 2021 while foreign transactions stood at N435 billion in the same period.
This meant that total domestic transactions on the NGX grew by 1.70 per cent while foreign transactions dropped by 37.24 per cent.
Analysts at Cordros Research, had in their H2 2022 outlook for equities, maintained that market performance will be far more resilient than in other pre-election years when market performance was pressured as investors’ consternation rose.
“This prognosis is based on the market being dominated by domestic investors and expectation that corporate earnings will remain resilient despite external concerns around global growth and internal concerns around spiralling inflation and the attendant impact on costs. Considering all the issues, our baseline expectation is that the market will remain resilient in H2 2022, and the return will settle at +27 per cent by the end of 2022”, they said.