The Nigerian Exchange Limited (NGX) has experienced its highest monthly gain since 2017, despite political uncertainties and foreign exchange (FX) pressure. In July 2023, the NGX’s All Share Index (ASI) grew by 5.5 percent, marking a positive end to the month and outperforming other African exchanges such as Kenya, Mauritius, Tanzania, and Uganda.
The positive return can be attributed to a combination of factors. Firstly, insider dealings among companies, as directors and related parties consolidated their positions, demonstrated their belief in the underlying value of these companies. Additionally, there was a sustained positive reaction to the ongoing reforms implemented by President Bola Tinubu.
Throughout the month, the benchmark NGX All-Share index showed bullish tendencies. It started the trading month at 60,968.27 points and closed at 64,337.52 points, representing a 5.53 percent growth. Market capitalization, the listed value of equities, also rose by N1.814 trillion from N33.197 trillion to N35.011 trillion.
Although there were some instances of profit taking, selloffs, and FX pressures, the overall trend remained bullish. The year-to-date (YTD) performance of the stock market stood at 25.5 percent at the end of July.
Monthly trading activity on the domestic bourse saw significant improvement. Average trading volume rose by 58.6 percent, while the value traded increased by 56.5 percent month-on-month (m/m), reaching 1.1 billion units and N16.7 billion, respectively.
Analyzing the performance of the market indices, the Oil and Gas index emerged as the best performer, experiencing a 20.05 percent gain m/m and a 101.40 percent gain YTD. The Insurance Index also saw notable growth, gaining 14.83 percent m/m and 49.54 percent YTD. The Industrial Goods index increased by 14.17 percent m/m and 18.36 percent YTD. The Banking index showed slight growth at 3.84 percent m/m and 60.53 percent YTD. However, the Consumer Goods Index faltered, experiencing a 4.58 percent decline m/m, bringing its YTD performance to 44.97 percent.
Economic analysts attributed the market’s performance to mixed economic data and corporate earnings. They highlighted the impact of factors such as cash crunch, electioneering activities, change in administration, and new reforms on the market and the overall economy. Some consumer goods companies recorded losses due to the FX unification reform, which affected their H1 financial results. The consumer goods sector is particularly vulnerable to the FX market, as companies in this sector often source loans and raw materials using foreign currency. The cost of FX significantly increased from an average of N470/$1 to N800/$1.
Looking ahead, analysts expect more corporate earnings and possible interim dividend declarations to stimulate increased bargain-hunting activities on the NGX. Overall, the positive performance of the Nigerian Exchange in July 2023 reflects growing investor confidence despite prevailing challenges and uncertainties.
Note: Please note that this article has been generated using artificial intelligence and may not fully reflect human writing style or tone.
