Equities Investors Get Inflation Cover as Market Return Hits 41.4%

Equities Investors Get Inflation Cover as Market Return Hits 41.4%

Equities investors gained more than N2.1 trillion to about N58 trillion amidst economic dislocation spooked by price instability and sustained decline in local currency value.

The naira has crossed several red lines, traded at about N1538 per US dollar while January inflation rate worsened to 29.90%. Year to date, the local bourse has gained more than 41%, with some companies doing returns in multiples.

Despite nosediving macroeconomic numbers, the Nigerian Exchange (NGX) appears to have bucked the trend as the local bourse continues to rise without much struggle. Stock traders’ bets on growth, and value companies’ shares have raised market temperature and year to date have accelerated strongly – providing cover against inflation conditions.

The benchmark index reversed its loss and rebounded by a substantial 3.79% week-on-week to another new historic high of 105,722.78 index points. In its market update, Cowry Asset Limited attributed this to mixed sentiment and low trade volumes despite positioning in the bellwether stocks which drove activity.

Market data showed that year-to-date return rose to 41.39%, racing ahead of an annual inflation rate of 29.90%. This resulted in a total of over N2.1 trillion gain being added to the wealth of market investors, Cowry Asset Limited said in a report sent to investors.

Stockbrokers at the firm noted that the level of investor sentiment was shaky as market players digested the latest inflation figure coupled with the expectation for a continued increase in money market rates at the primary auctions, which will render the equity markets as an unattractive investment option for investors.

Data showed that total traded volume decreased by 37.06% week on week to 1.56 billion units, with the number of trades nosediving by 22.62% week on week to 42,546 deals. Also, the total traded value plunged by 23.74% to N36.50 billion.

The market recorded mixed results on sectoral performance as two out of five sectors declined sharply. The Banking and Industrial indexes bled with losses, declining by 1.34% and 1.83%, respectively, stockbrokers said. This was primarily driven by price drops in key stocks such as ACCESSCORP, GTCO, WAPCO, and RTBRISCOE, according to a market report sent to investors by Cowry Asset Limited.

On the contrary, the Insurance, Oil & Gas, and Consumer Goods indexes, recorded gains of 2.66%, 10.96%, and 5.25% week-on-week, driven by strong demand and positive price movements in GEREGU, AIRTELAFRI, and SEPLAT. Top-performing stocks at the close of the week included JULI (+46%), GEREGU (+33%), BUAFOODS (+21%), AIRTEL (+10%) and FBNH (+9.8%).

On the flip side, stocks like MEYER (-19%), MORISON (-18%), DEAPCAP (-14%), FLOURMILL (-12%), and ACCESSCORP (-9%) experienced declines in their share prices, respectively. Overall, the equities capitalisation of the Nigerian Exchange rose to N57.85 trillion at the end of the trading session on Friday.

Ahead of trading activities for the new week, Cowry Research anticipates a mixed trend of market activities as the recently published inflation data permeates the market with portfolio rebalancing by investors and fund managers seeking alpha in the market as well as the expectations from the fixed income market.

However, a pullback at this juncture is expected to strengthen upside potential. #Equities Investors Get Inflation Cover as Market Return Hits 41.4% Africa Countries Top World’s 20 Fastest-Growing Economies in 2024