…beats South Africa, Kenya market
Nigeria’s equities market has risen by 264 percent in the past five years driven by a combination of new listings and earnings growth which lured investors.
Over the same five-year period, the stock market of Africa’s most populous country outshined that of South Africa and Kenya. The NGX ASI has risen by 264 percent since 2020, while the Johannesburg Stock Exchange increased by 47.32 percent and the Nairobi All Share Index decreased by 31.4 percent.
The NGX All Share Index (ASI) and equities market capitalisation opened the year 2020 at 26,842.07 points and N12.968 trillion respectively but rose to 97,722.28 points and N59.215 trillion respectively as at Friday November 15.
“The last five years have been a golden period for listed Nigerian equities, with the NGX All-Share Index up 262.3 percent since January 1, 2020. Doubtless low market interest rates have played a role in encouraging investors to take risk: earnings growth and new listings have also driven the market.
“Since January 1, 2024 our Model Equity Portfolio has delivered a notional 45.96 percent against the index’s 30.69percent return”, said Lagos-based Coronation research analysts in their November 18 note.
The Nigerian Exchange Limited this Wednesday lists by introduction on the Main Board of NGX, the shares of Haldane McCall Plc. Haldane McCall will list its 3.122billion ordinary shares of 50kobo each at N3.84 per share.
Other newly listed stocks from January till date that helped power the growth at the Nigerian bourse include: Aradel Holdings Plc which listed by Introduction on October 14. The company listed its 4.344billion shares on the NGX Main Board at N702.69 per share. The added N3.053trillion to equities market capitalization.
Also, Transcorp Power Plc listed by Introduction on March 4, 2024 its 7.5billion shares at N240 per share.
The listing added N1.8trillion to the equities market capitalisation. Some other companies on the Bourse did supplementary listing, private placements, debt-to-equity conversion, as well as public offer and rights issue as banks race to meet up the CBN deadline for their recapitalisation.
“The listing of Haldane McCall further reinforces the equity market as the preferred platform for private equity and strategic investors to divest their stakes. Transformative listings, including Geregu Power, Transcorp Power, and BUA Foods, have set a high benchmark, fostering industry transparency and healthy competition”, said Jude Chiemeka, Chief Executive Officer, Nigerian Exchange Limited.
Chiemeka noted that these milestones “have created a ripple effect, encouraging more companies to leverage the market’s potential. This progress is reflected in the remarkable growth of secondary market activity, with daily turnover rising from N3 billion in 2021 to N11 billion today. The Nigerian Exchange remains committed to driving economic growth and providing a platform for companies to achieve their strategic objectives.”
Stocks that have powered the market, yielding over 100 percent return in 2024 according to NGX trading data as at Monday November 18, when the year-to-date (YtD) return stood at 30.72 percent are: Juli Plc (+1,646percent), Oando (+509.52 percent), Transcorp (+406.93 percent), RT Briscoe (+359.02 percent), Eunisell (+311.88 percent), Julius Berger (+301.16 percent), John Holt (+266 percent) and Veritas Kapital (+251.35 percent).
Nigeria stocks have risen remarkably despite persistent increase in Nigeria’s Monetary Policy Rate (MPR) at 27.25 percent which its notable impact is the shift in investor sentiment to fixed-income (FI) instruments such as government bonds and treasury bills that became more attractive to investors.
Other major advancers this year are: Conoil (+208.70percent), Geregu (+188.22 percent), IMG (+182.16percent), Presco (+151.50 percent), Seplat (+144.13 percent), and Sunu Assurances (+136.36percent). While Fixed Income instruments offer higher yields with lower risk compared to equities, the shift has not led to a remarkable reallocation of capital from the stock market to the fixed-income market.
Others are: Cutix (+112.77percent), Meyer (+113.65percent), BUA Foods (+104.19percent), Flour Mills (+134.49percent), United Capital (+119.12percent), Deap Capital (+103.45 percent), and Livestock Feeds (+100percent).
“Looking forward, the equities market is expected to retain its buy interest as investors cherry-pick undervalued stocks. However, given the high interest rates in the fixed income and money markets, we expect some bearish undertone to persist in the equities market as fixed income biased investors take advantage of the high yields in the fixed income space.
“Nevertheless, the Bulls will remain incentivised to persist in bargain hunting, given the tremendous mid-long-term opportunities in the equities market. Fund managers and businesses may entertain mid-long-term (more than 3 months) investment objectives, cherry-picking only sound equities with strong fundamentals and ongoing/pending corporate actions. This strategy will maximise market opportunities, thereby optimising portfolio returns,” said United Capital research analysts in their November 18 note.
Coronation research analysts noted that this year, their Model Equity Portfolio (MEP) is having an exceptional year, outperforming the NGX Exchange All Share Index by 1,527 basis points year-to-date.
“This compares with its average annual outperformance of 466bps over the past four years 2020-2023. How has this happened? Part of our outperformance has come from a timely underweight in bank stocks early in the year, part of it from a useful (though short-lived) notional underweight in Airtel Africa. And part of it has come from our main conviction trade of the year, namely a double overweight position in Seplat Energy.
“We recognised that not holding neutral positions in the largest stocks by index weight exposes a portfolio to the risk of underperformance, if those stocks rally. In the last week of January this year we were, quite accidentally (because we had over-compensated for a notional underweight position two weeks earlier), slightly overweight in Dangote Cement when it rallied by 98.3 percent over a fortnight. We were also slightly overweight BUA Cement, which also rallied. By the end of January we had out-performed the market by 596 basis points,” Coronation research analysts further said.
