The Nigerian Exchange Limited (NGX) is poised to end the first half of 2024 on a high note, reflecting renewed investor confidence despite ongoing economic challenges. As of June 25, the All-Share Index (ASI) closed at 99,217 points, delivering a year-to-date return of 32.69%.
First Half Review
Despite economic adversities such as high inflation, currency depreciation, and security issues, the NGX has shown remarkable resilience. The ASI’s 32.69% return underscores a strong performance, although contrasting quarterly results have been observed. The first quarter boasted a return of 39.84%, propelled by strong earnings, positive dividend announcements, and favorable government policies. However, the second quarter saw a decline, with returns dropping to -5.11% as of late June, largely due to high interest rates steering investors towards fixed-income securities.
Second Half Predictions
Financial experts foresee the primary market for equities taking center stage in H2 2024. The commencement of a banking recapitalization exercise and additional capital raises, particularly in the brewery sector, are expected to drive significant increases in capital-raising activities. Stability in the forex market is also anticipated, attracting foreign investors and bolstering market performance.
Expert Opinions
Mr. Paul Uzum, Director at Halo Nigeria Capital Management Limited, predicts elevated interest rates for money market instruments, which may temper a broad market rally. He highlights several primary market offers, including ongoing and upcoming rights issues from major banks such as Fidelity Bank, Access Bank, and UBA.
Mr. Victor Chiazor, Head of Research at FSL Securities Limited, expects interim dividends and company-specific momentum to drive market activities in the latter half of the year. He also notes that companies exposed to forex losses may see stagnating share prices.
Mr. Oladipo Ajayi, Head of Fixed Income at Chapel Hill Denham, anticipates significant capital market activities due to the banking recapitalization exercise. He also foresees currency stabilization in the forex market, benefiting manufacturing firms by enabling them to return to profitability.
Mr. Tunde Amolegbe, Managing Director/CEO of Arthur Stevens Asset Management Limited, projects a bearish secondary market for the rest of the year, dominated by primary market activities. He remains optimistic about the stability of the fixed-income market, expecting the Monetary Policy Committee to ease its tightening stance with slowing inflation rates.
Mr. David Adonri, Executive Vice Chairman of Hicap Securities Limited, expects an active equities market in the primary sector, driven by the banking recapitalization. He also anticipates sustained secondary market momentum due to quarterly results and interim dividends. Additionally, Adonri foresees an attractive debt market with rising yields reflecting recent interest rate hikes.
Bottom Line
As Nigeria navigates the second half of 2024, the NGX is expected to see robust capital-raising activities and a positive impact from stabilized forex rates, despite ongoing economic challenges. The proactive measures and strategic initiatives by the CBN and market stakeholders are likely to sustain this positive momentum, fostering economic resilience amidst evolving global economic landscapes.
