STOCK MARKET PERFORMANCE REVIEW: Investors’ fortunes dwindle as NGX year-to- date returns drops -6.2% in Q3

0
144

Top 15 stocks post N1.14 trn profit, N24.73 trn market capitalisation

Uba Group

Investors in stocks on the Nigerian Exchange Limited, a leading stock market in Africa, no doubt are counting their losses as the value of their investment dropped to the tune of 6.2 percent in the third quarter period ended September 2022. A review of performance of the market by The Point showed that year-to-date return dropped to 14.77 percent from above 21 percent in June whilst All Share Index and market capitalization recorded a significant drop from 51,817.59 and N27.94 trillion as at June 30, 2022, to 49,024.16 and N26.45 trillion on September 30, 2022, respectively. BAMIDELE FAMOOFO reports.

An investor with a stock portfolio worth N10 million at end of second quarter ended June 30, 2022 on the Nigerian Exchange Limited, on the average would have lost about N620, 000 of his capital, reducing its net worth to about N9.38 million at the end of third quarter ended September 30, 2022.
This was because the year-to-date return on investment on the bourse suffered a loss to the tune of 6.2 percent in the review period.
Data made available by NGX Limited, as contained in its weekly market report, showed that YTD return as at September 30, 2022 stood at 14.77 percent. It dropped from 20.97 percent recorded at the end of June 2022.

Johnson Chukwu, Group Managing Director, Cowry Assets Management Limited, noted that rising interest rates and exchange rate worries contributed largely to the drop seen in the equities market in the third quarter of 2022.

But according to the Cowry Asset Management lead analyst, the loss of the stock market is a gain for alternative markets as soaring interest rates in the economy are providing investors with attractive alternatives to stocks.

“Upward movements in the equities market in H1 2022 have not been sustained. The All-Share Index (ASI) and Market Capitalization (MC) have both dropped significantly from 51,817.59 and N27.94 trillion as at June 30, 2022, to 49,024.16 and N26.45 trillion on September 30, 2022, respectively,” Chukwu noted during a presentation of the performance of the market in Q3, 2022.

Meanwhile, the NGX Limited, while not contending the dismal performance of the market in the review period, argued that investment in the Nigerian stock market has been rewarding on the weighted average basis of three years.

According to Temi Popoola, CEO, NGX Limited, the 3-year trailing performance of the All-Share Index of the Nigerian Exchange Limited surpassed the average inflation during the same period.

His argument: “The annual inflation measured by the Consumer Price Index (CPI) released by the National Bureau of Statistics (NBS) in the month of September was 20.52 per cent. Meanwhile, the NGX ASI, a market capitalization weighted index of all companies listed on the NGX’s platform, had a year-to-date performance of 15.68% during the same period. This could be misleading about the performance of the market until you view it through a longer term lens.”

“Upward movements in the equities market in H1 2022 have not been sustained. The All-Share Index (ASI) and Market Capitalization (MC) have both dropped significantly from 51,817.59 and N27.94 trillion as at June 30, 2022, to 49,024.16 and N26.45 trillion on September 30, 2022, respectively”

“On a 3-year trailing basis, the NGX ASI has outperformed the CPI average in the same period, ensuring that investors with a longer term hold on their investments remain in a positive region. Analysis of data of closing prices gathered from the NGX’s website showed that the index has a 3-year moving average of 22.97 percent, compared to an inflation average of 15.72 percent. The chart below gives a better visual representation of the numbers,” the NGX boss further contended.

However, the NGX noted that 2022 has been a slow year for global stocks due to volatility resulting from the hiking of interest rates by central banks in the United States and Europe amidst inflationary pressures.

“The NGX ASI’s 15.62 percent YTD return is a significant positive performance compared to the US S&P 500 which has plunged by 22.46 percent or the FTSE 100 which has declined by 7.68 percent, according to Google Finance. The local bourse has so far exhibited resilience and has insulated investors from negative return on investment over a three year period,” it noted.

How the sectors fared on NGX in Q3
Banking
The banking industry lagged behind every other sector during the review period except the Industrial sector in the year to date performance chart. The NGX Banking Index dropped from 406.1 index points to 378.2 index points, depreciating by -6.86 percent.

The outlook on the sector is bright as financial experts expect a rise in interest-earning activities in Q3 and going forward and project a positive perspective for the banks in the end of year run-in. Increased political spending in anticipation of the 2023 general election and hike in MPR and CRR (15.5% and 32.5% respectively) by the MPC, which may lead to higher interest income, are expected to lead to increased earnings for banks.

Meanwhile, adverse operating conditions currently observed, will lead to a higher proportion of Non-performing Loans in the banking sector.

Telecommunications Sector
The launch of 5G by MTN is considered by analysts a significant milestone in seamless communication and interconnectivity between smart devices. The sector has experienced significant development primarily in the expansion of its revenue base as a result of increased mobile penetration. Over four million new telephone lines were added to the networks so far this year. The approval of MTN and Airtel payment service banking licenses brought buyers into the market for both telecom stocks.

Some noticeable events in the sector in the review period include shut down of proposed tariff-raising of customers by NCC, claiming recourse must be taken to include stakeholders consultations, cost studies, among others before any tariff hikes.

Industrial Sector
The NGX Industrial has shed from 2008.3 points at the start of the year to 1773.2 year-to-date, an 11.71 percent drop, being the worst sectoral performer so far in 2022. But the outlook looks good for the sector as perceived growing need and interest in infrastructure development in Nigeria, where all perspectives of construction ranging from real estate investment, raising buildings as a store of value (hotels, homes, recreational centers, will drive activities. Also as the election period approaches, there is a rush to complete road and infrastructure projects as campaign strategy which will increase the demand for construction material.

“CBN"

Oil and Gas
The Oil and Gas index has outpaced the market capitalization growth among indices so far this year, having grown by an estimated 47.3 percent year-to-date. SEPLAT is a major driver in this sectorial performance, having gained 92 percent in price year-to-date. The sector recorded a 58 percent increase in price in the first half of the year, a sharp response to the energy crisis in the aftermath of the Russian Invasion, but has slightly dwindled following less supply chain problems. On the outlook side, experts at Cowry Asset Management said they expect this upward trend to continue as the Ukraine/Russia crisis has shown no signs of ending soon.

“With Russia having halted their oil exports to Europe, there are fears of an even tighter constriction on an already limited global oil supply.”

“The NGX noted that 2022 has been a slow year for global stocks due to volatility resulting from the hiking of interest rates by central banks in the United States and Europe amidst inflationary pressures”

Consumer Goods Sector
The Consumer Goods index has the 3rd highest growth among indices on the NGX. The index recorded a 5.8 percent increase in price since the turn of the year. Persistent rising inflation of raw materials and distortion in the supply chain have influenced the hike in prices of goods.

“On the outlook side, with expected persistence of inflation we can project growth in this sector as revenues will increase to reflect price increases. Inelastic nature of demand here makes the sector less vulnerable to market volatility,” Cowry noted.

How ‘NGX30’ top 15 stocks performed in Q3
The ‘NGX 30’ top 15 companies jointly accounted for N24.73 trillion of market capitalization with Airtel Africa Plc being the most capitalized with about N6.5 trillion. MTN Nigeria Plc emerged second on the capitalization table with N4.68trillion while Dangote Cement ranked third with N4.64 trillion. BUA Cement Plc and Nestle Nigeria Plc appeared on the top five charts with N2.43trillion and N1.11trillion, respectively.

Other stocks on the top 15 most capitalized list are BUA Food, N990bn; Seplat, N759bn; Zenith Bank, N681bn; GTCO, N603bn and Nigerian Breweries Plc, 483bn. At the bottom of the capitalization table of the top 15 stocks are Stanbic, N435bn; WAPCO (Lafarge Plc), N425bn; FBNH, N416bn; Access Corporation, N320bn and ETI, N261bn.

Top 15 stocks by profit
MTN Nigeria Plc was Nigeria’s most profitable stock listed on the NGX in the third quarter of 2022. The leading telecom company, second largest by capitalisation, posted a profit after tax of N181.63bn.

Dangote Cement Plc from the Industrial sector was the second most profitable company with N172.10bn while banking stock; Zenith Bank Plc posted N111.41 billion to emerge third. Access Corp and ETI posted N88.74 billion and N78.21billion to occupy the fourth and fifth positions, respectively.

Others are GTCO Plc, N77.56 billion; AIRTEL Plc, N75.08 billion; UBA Plc, N70.33 billion; BUA Cement, N61.36 billion and FBNH, N56.60billion.

At the base of the top 15 most profitable stocks are BUA FOOD, N39.31 billion; WAPCO, N37.41 billion; SEPLAT, N35.45 billion; STANBIC, N30.67 billion and NESTLE, N27.75 billion.

The 15 most capitalized stocks on the NGX30 platform posted a total profit after tax of about N1.14 trillion in Q3, 2022.