The Nigerian Exchange (NGX) witnessed a remarkable turnaround in the past week, reversing its recent downward trajectory and delivering substantial gains to investors. This surge in market performance was primarily attributed to the announcement of dividends for the 2024 financial year by several corporations, particularly financial institutions that released their audited reports showcasing robust performances and attractive dividend declarations. This positive news injected renewed optimism into the market, attracting investors and driving up share prices. The overall market sentiment was further bolstered by quarter-end portfolio rebalancing and window-dressing activities, which typically involve fund managers adjusting their holdings to improve their portfolio’s appearance and performance. These activities contributed to increased trading volume and further reinforced the bullish trend on the NGX.
The positive momentum propelled the NGX All-Share Index (ASI) and market capitalization upwards, registering a 0.66% increase to close at 105,660.64 and N66.26 trillion, respectively. This broad-based rally saw gains across most sectors, with the NGX Banking Index leading the charge, surging by 4.28% week-on-week. This impressive performance was driven by strong investor interest in banking stocks like Guaranty Trust Holding Company, FCMB Group, Fidelity Bank, and First HoldCo. The NGX Insurance Index also witnessed significant growth, rising by 3.21%, boosted by gains in Mutual Benefits Assurance and SUNU Assurance. While the NGX Consumer Goods and NGX Industrial indices recorded more modest increases of 0.12% and 0.01% respectively, they nonetheless contributed to the overall positive market sentiment. Stocks like Champion Brewery, Ikeja Hotel, and UPDC drove the gains in these sectors. In contrast, the NGX Oil/Gas and NGX Commodity Indices experienced declines of 1.65% and 0.76% respectively, indicating some sector-specific pressures.
The prevailing bullish sentiment was further underscored by the market breadth, which measures the ratio of advancing stocks to declining stocks. A market breadth of 1.19 times, with 43 stocks advancing compared to 36 decliners, signified a healthy and broad-based rally. This suggests that the positive momentum was not confined to a few select stocks but extended across a wider range of companies listed on the exchange. The dominance of the bulls in three out of the five trading sessions further reinforces the optimistic outlook for the Nigerian stock market. The year-to-date return for the ASI also improved, reflecting the renewed investor confidence following the dividend announcements and positive earnings reports.
Trading activity on the NGX surged significantly during the week, with a remarkable increase in both volume and value of traded equities. The total number of transactions jumped by 7.48% week-on-week to 61,309 deals, while the volume of shares traded witnessed a staggering 159.2% increase to 7.52 billion units. The total value of traded equities also soared by an impressive 730.04% to N398.95 billion. This heightened trading activity can be attributed to increased institutional participation and strategic repositioning by investors in anticipation of dividend payouts. The industrial goods sector dominated trading activity, accounting for a significant portion of both volume and value, followed by the financial services and services industries.
Within the heightened trading activity, a few specific equities dominated the market. Lafarge Africa Plc, Sovereign Trust Insurance Plc, and Cutix Plc accounted for a substantial proportion of the total equity turnover, both in terms of volume and value. This concentrated trading in these specific stocks highlights the impact of specific corporate news and investor sentiment on individual share prices. While the overall market trend was positive, some stocks experienced declines as investors booked profits or exited positions. Africa Prudential Plc, CWG, John Holt, UH Real Estate Investment Trust, and United Capital were among the notable decliners during the week, demonstrating the inherent volatility within the market even amidst a broader bullish trend.
Market analysts anticipate the positive momentum to persist as the earnings season progresses, with forthcoming dividend announcements expected to maintain investor interest in blue-chip stocks. The release of corporate earnings results and macroeconomic data may introduce some volatility as investors reassess their positions. However, the underlying sentiment remains optimistic, fueled by the positive earnings reports and the prospect of further dividend distributions. Investors are advised to focus on fundamentally strong stocks with consistent earnings growth and resilient business models to ensure sustainable long-term value creation.
Looking forward, the Nigerian stock market is expected to remain dynamic, influenced by both company-specific factors like earnings announcements and dividend payouts, as well as broader macroeconomic trends. While the current bullish sentiment provides a positive outlook, investors should remain vigilant and adopt a strategic approach, focusing on fundamentally sound companies with strong growth potential and robust financial performance. The interplay of these factors will continue to shape market dynamics and influence investor behavior in the weeks ahead.
