June 23, 2022/CSL Research
The Nigerian equities market sustained its bull run in the month of May as the All-Share Index (ASI) returned a m/m gain of 8.1%, higher than its 5.7% m/m return in April. This pushed the YTD gain to 25.6% in May from 16.2% in April. In same vein, the total value traded on the local bourse increased by 195.1% m/m to N607.5bn (US$1.45bn) from N205.9bn (US$494.3m) in April.
We opine that the bull run was largely driven by the extended dividend declarations from corporates such as Nahco, Airtel, FBN Holdings and Presco in the month of May in addition to others including Nestle, Seplat, Cadbury, Conoil, Dangote Cement with dividend qualification dates in May, hence investors sentiments remained positive as they positioned for the dividend income. For the significant jump in total value traded, we believe activities around the acquisition between Titan Trust Bankand Union Bank of Nigeria (UBN) drove the significant jump in the total value traded.
Domestic investors’ share of total transactions improved to 92.5% in May from 86.9% in April (YTD–86.6%), while foreign investors’ share was down to 7.5% from 13.2% in April (YTD–13.4%). The increase in total transaction value was broad-based as both domestic(+214.4% m/m) and foreign investors (+67.3% m/m) increased participation level.
On the domestic front, the increase in activity level to N562.2bn (US$1.34bn; +214.4% m/m) was broad-based, riding majorly on increased transactions by institutional investors (+341.3% m/m to N487.96bn; US$1.16bn), further supported by retail investors (+8.8% m/m to N74.2bn; US$176.9m). On the other hand, Unlike in April when foreign investors reduced their activity level (-35.8% m/m), the reverse was the case in May, as they increased activity level by 67.3% m/m. However, similar to a net inflow position of N2.96bn (US$7.1m) achieved in April, foreign investors retained a net inflow position of N5.76bn (US$13.7m) in May. The stronger increase in foreign inflows (+70.0% m/m) compared to the increase in inflows (+63.9% m/m), led to the net inflow position.
Heading into the last month of H1 2022, the domestic equities market is poised to close positive as the YTD gain currently stands at 20.3%. Looking into June, we expect activity level to remain high though not up to the level seen in May. Profit taking in the first half of June created an attractive entry point for investors to cherry-pick stocks as the H1 2022 earnings season draws near. Again, if market rates begin to rise significantly following the recent hike in the MPR to 13.0%, we may begin to see less interest in the equities market in subsequent months.
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