By Chinwendu Obienyi
Impressive 2021 and first quarter (Q1 2022) corporate earnings by bellwether stocks quoted on the Nigerian Exchange Limited (NGX), helped investors gain N1.45 trillion at the end of transactions in April.
This is coming amid uncertainties in the global economy and profit-taking activities which made investors lose a total of N213 billion as market capitalisation closed at N25.311 trillion while the All Share Index (ASI) equally declined by 395.21 points or 0.8 per cent from 47,360.79 to 46,965.48 points in March.
However, strong results from companies that released results led to investors increasing their bets on blue-chip companies in anticipation of continued expansion in profits.
Indeed investors’ appetite for stocks supported market performance and despite 19 trading sessions in the month under review, the main index grew to +5.7 per cent to close the month at 49,638.94 points while market capitalisation grew by N1.45 trillion from N25.311 trillion to close the month at N26.761 trillion.
Similarly, the NGX Banking and NGX Afr. bank value stood at 6.24 per cent and 6.70 per cent, the NGX Sovereign indices closed at 0.31 per cent while, NGX Asem and NGX Growth closed flat.
Commenting on the market performance in the month under review, market analysts said the main driver of the gain in market capitalisation in the month of April was due to the impressive FY 2021 and Q1 2022 financial results from companies quoted on the stock exchange.
According to them, investors will continue to rotate their portfolios towards cyclical stocks that delivered decent earnings last month.
In a telephone chat with Daily Sun, Head of Research at FSL Securities, Victor Chiazor, noted that as investors’ appetite grew, the prices of stocks kept pushing up, hence the reason the prices of stocks were high in April.
“Also, April saw the influx of Q1 numbers which were impressive. We have seen Zenith Bank, UBA, AccessCorp and Dangote Cement reporting decent increase in profit after tax (PAT) and we saw investors scrambling to make sure they qualify for the dividends and so I think that sentiment should continue even in the new month.
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 do pretty well on the back of Q1 numbers especially for those that pay interim dividends. So, investors might want prices to relax a bit before they take position. However, a few of the stocks that actually have their year-end in March like Flour Mills, we may begin to see a bit of entry because we expect to see investors buy their stocks to take advantage of the full year dividend”, Chiazor said.
For their part, Cordros Research, said that they expect investors to continue to rotate their portfolios towards cyclical stocks as they foresee the dominance of the bulls on the local bourse.
“We see scope for the bulls to maintain dominance, albeit the magnitude of the gains will be substantially lower, as profit takers are likely to cash out on the gains across bellwether stocks. Notwithstanding, 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.