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Nigeria stock market trails Argentina as world’s second best in 2024

Positive records seen this year at the Nigerian equities market have pushed it up by 11.6 percent, making it world’s second best in 2024, after Argentina.

With only one session of negative close this year, Nigeria’s stock market has advanced positively as investors continued to take advantage of the relative cheapness of some counters while positioning ahead of full year results and corporate actions.

“The market returned 4.24 percent week-on-week (w/w) compared to prior week’s 6.54percent, as we saw some profit taking action this week.

“Also, given the strong close in the consumer goods sector, we are likely to see price correction in that space at the start of trading next week, while other sectors trade mix,” said Lagos-based Vetiva Research analysts.

The Nigerian equities market closed in the green zone for the second trading week of the year as the All-Share index (NGX-ASI) gained 4.24percent week-on-week (WoW) to reach 83,042.96 points.

Across sectoral indices, NGX Banking rose by +5.10 percent WoW, NGX Consumer Goods (+9.60 percent WoW), NGX Insurance (+7.63 percent WoW), and NGX Industrial Index (+4.80 percent WoW) recorded gains while NGX Oil and Gas (-1.61 percent WoW) closed in the red zone.

The Nigerian equities market closed the year 2023 with equities capitalisation at N40.917trillion and NGX All Share Index (ASI) at 74,773.77 points. The market finished 2023 with returns of 45.90 percent.

Bargain hunting activities at the Nigerian Exchange Limited (NGX) continued on Monday, pushing the benchmark performance indicator above 80,000 mark.

After a successful outing in 2023, most research analysts are positive in their outlook for equities this year 2024.

The stock market of Africa’s largest economy is outperforming all peers in the Europe, Middle East and Africa region as pension funds and institutional investors buy stocks on positive outlook of profits from banks recording revaluation gains on their FX positions.

Banks and other listed companies are due to release their full year 2023 financials and investors are bullish to see dividend proposals.

Vetiva Research analysts said, “In 2024, our outlook is characterised by cautious optimism as we anticipate sustained growth within the telecoms sector, with MTNN poised to maintain its impressive trajectory.

“Simultaneously, the banking space is expected to sustain its allure among investors, driven by the prevailing high-interest rate environment and the persistent FX pressures exerted on the Naira.

“This year, we foresee a continuation of the investment strategy employed in 2023. Our anticipation revolves around an ongoing emphasis on fundamentally sound stocks within pivotal sectors such as Telecoms,
Banking, Consumer Goods, Industrials, and Oil & Gas, with a special focus on dividend-paying stocks.

“Our outlook envisions another year of positivity for the equity market, primarily propelled by local investors”.

CardinalStone Research analysts said, “In delineating potential options for equity investors in 2024, we highlights the following: Dangote Refinery: Likely to drive improved sentiments in the mid and downstream oil and gas sector, especially because it could make regulators more willing to accommodate demand and supply-
driven PMS prices. This commencement may combine with the proposed listing of the refinery to drive positive sentiments in Nigerian assets in 2024, given the expected passthrough to FX liquidity”.

“Banking sector recapitalisation: Likely to drive mergers and acquisitions within the banking industry. If the broad strategy for recapitalisation is inorganic, savvy investors will likely mop up shares in potential targets (example Tier 2 and Tier 3 banks) in 2024.

“Conversely, if a more organic approach is favoured (that is private placements or public offerings), banks may work to reprice existing equities upwards so that they can raise the maximum from placements or public offerings. In this instance, it may be wise to pitch a tent with banks with the highest book values because they will have more legroom to reprice existing equities upward,” the analysts said.

“Other Corporate Actions: Away from the banking sector, there are unconcluded corporate actions that are likely to play pivotal roles in shaping market sentiments in 2024. For instance, there is the Dangote Sugar, NASCON, and Dangote Rice merger for which investors are still awaiting the scheme document.

“Investors could buy and hold ahead of the release of the document or play tactical trades with the spread between Dangote Sugar and NASCON in the interim, given the available information. Similarly, SEPLAT, OANDO, GSK, and PZ also have unconcluded corporate actions.

“The first two are looking to conclude acquisitions that are likely to trigger a repricing of their equities, while the latter duo seek to exit the country in such a fashion that may throw up tactical opportunities given market volatility,” CardinalStone Research analysts further said.

CardinalStone Research analysts also noted: “Potential Return of FPIs: While prior to the post-election rally of 2023 would have been better, early 2024 may still be a good time to enter into the markets in anticipation of the return of FPIs, especially if the CBN Governor goes ahead to tighten in the first two quarters (in line with his guidance) and, inadvertently, create some attractive entry opportunities into some securities. For context, foreign inflows into equity amounted to only N157.3 billion in 2023 versus N772.2 billion in 2017, the last time similar pro-market policies”.

Also in their 2024 outlook, Meristem research analysts said, “Since the initial wave of optimism that sparked through the domestic equities market after the ascent of the new administration, the Nigerian equities market maintained a predominantly positive trajectory throughout the second half of 2023 (save for the mild market correction witnessed in October). Corporate actions across sectors, favourable corporate results in the banking sector and investors’ increased appetite for bellwether stocks were significant factors that propelled this upbeat momentum.