Sustained bargain hunting lifts NGX market cap by N1.80trn in May

By Chinwendu Obienyi

Amid uncertainty in the global economy, the market capitalisation of Nigeria’s stock market grew by N1.80 trillion due to sustained bargain hunting in some premium stocks in the month of May 2022.

Impressive results from companies that released their Q1 2022 results led investors into increasing their bets on blue-chip companies in anticipation of continued profit growth in April 2022.

Notably, investors’ appetite for stocks supported market performance in 19 trading sessions, nudging the main index to +5.7 per cent growth to close the month at 49,638.94 points while market capitalisation grew 1.45 trillion from N25.311 trillion to close the month at N26.761 trillion.

Despite the poor performance in other developed markets, analysts said they expect investors to continue to rotate their portfolios towards cyclical stocks as they foresaw a bullish dominance on the local bourse.

The market started the month of May on a positive swing as the NGX All Share Index (ASI) reached a 13-year high, crossing the 50,000 mark for the first time since 2008. However, the Central Bank of Nigeria recent announcement of a hike in the Monetary Policy Rate (MPR) to 13 percent somewhat dampened the mood of investors especially in the last trading days of the month. Specifically, the ASI which opened the month under review at 49,638.94 points, closed at 52,990.28 points while market capitalisation grew by N1.80 trillion from N26.761 trillion to close the month at N28.567 trillion.

Reacting to the performance of the market, analysts at Coronation Research observed that despite negative sentiments dominating global equities, the NGX remained resilient, noting that “the equities market is in an interesting condition”.

According to them, the bearish trends seen in the latter part of the month was as a result of the market responding to the CBN’s announcement of a 150 basis points rise in the MPR to 13.0 per cent. “This signal had the immediate effect of raising market interest rates and making fixed income investments somewhat more attractive than they have been so far this year. Equity investors, especially those who have earned good returns so far this year, might consider switching to Money Market and Fixed Income funds, in our view”, they said.

For his part, the Head of Research at FSL Securities, Victor Chiazor, said with the CBN’s announcement, investors will switch to “cautious mode”. “I think we might see a bit of caution on the part of investors because we are not expecting any of the major Q1 2022 earnings and so even if we see a bit of rally, it will be just a few stocks that investors are betting on.