Key highlights
- The Nigerian Exchange Limited (NGX) is expected to close the first half of 2024 positively, driven by renewed investor confidence despite economic challenges, with a year-to-date return of 32.69%.
- Financial experts predict significant capital-raising activities in H2 2024, driven by banking recapitalization mandates from the Central Bank of Nigeria (CBN) and increased stability in the forex market, attracting foreign investors.
- The market outlook for H2 2024 includes substantial primary market activities and company-specific momentum, with notable expectations for interim dividends and potential stabilization in the fixed-income market due to slowing inflation rates.
The Nigerian Exchange Limited (NGX) is set to close the first half of 2024 on a positive note, driven by renewed investor confidence in listed companies.
This marks a significant achievement for NGX, despite ongoing economic adversities such as heightened inflation, currency depreciation, and security challenges.
This optimism has translated into discernible changes in purchasing patterns, with the All-Share Index closing at 99,217 index points as of June 25, 2024.
The year-to-date (YTD) return of the NGX All-Share Index stands at 32.69%, highlighting strong performance despite recent bearish trends.
However, the equities market has shown contrasting performances in the first two quarters of 2024.
The first quarter saw an impressive return of 39.84%, driven by strong company earnings, positive dividend announcements, and favourable government policies.
By contrast, the second quarter experienced a decline, with returns falling to -5.11% as of June 25th.
This downturn has been largely attributed to the higher interest rate environment, which has driven investors towards fixed-income securities, putting downward pressure on market performance.
Financial experts, in exclusive chats with Nairametrics, have predicted that the primary market for equities will take centre stage in H2 2024, driven by the commencement of a banking recapitalization exercise.
Significant increases in capital-raising activities are expected, spurred by the recapitalization mandate for banks issued by the Central Bank of Nigeria (CBN) and additional capital raises by companies in sectors such as the brewery industry.
Experts also predict that the country’s currency will begin to stabilize in the forex market, positively impacting the capital market by attracting foreign investors.
Expectations of financial experts
Director at Halo Nigeria Capital Management Limited, Mr. Paul Uzum in an exclusive chat with Nairametrics said that interest rates for money market instruments will remain elevated, as the Central Bank of Nigeria (CBN) maintains high rates to combat inflation.
Uzum said this is expected to make money market instruments like treasury bills and commercial papers more attractive compared to the stock market, potentially dampening a broad market rally.
He noted that the second half of 2024 will also see several primary market offers, including rights issues and public offers from listed banks.
“Fidelity Bank’s offer is currently ongoing and will conclude in July. Access Bank will launch a rights issue at N19.7 in July, followed by UBA in August, with GTCO and Zenith Bank entering the market subsequently in Q3 2024.
FBNH will also be offering a rights issue at N16, and other banks are expected to follow in Q4 2024,” he said.
According to him. the H1 2024 results for most companies will be published by the end of July, with significant market attention on companies like Total, Presco, and Okomu Oil.
“Total and Presco reported strong Q1 2024 results, with Total achieving an EPS of N32 and Presco an EPS of N24.
If these trends continue, the market is likely to reward these stocks further. Should Total achieve an EPS of N60 for the half-year, its stock could be priced over N500.
Presco’s share price has surged from N210 to N358 in Q2, which will likely positively influence Okomu Oil.
Additionally, the market anticipates that Ellalakes, the third listed agricultural company, will begin reporting revenue for the first time in H2 2024,” he said.
Conversely, Uzum said companies that incurred substantial FX losses last year are expected to report significant losses in their H1 2024 results, due at the end of July.
According to him, these include firms like MTN, Airtel Africa, Dangote Sugar, Guinness, Nigerian Breweries, International Breweries, Cadbury, Unilever, and Nestlé.
He noted that these anticipated losses may prompt investors to divest from these stocks in favour of those with stronger fundamentals and money market instruments.
“Nigerian Breweries will conduct its rights issue in H2 2024, and International Breweries’ ongoing rights issue will conclude in Q3.
Furthermore, a mandatory tender offer is expected for minority investors in Guinness following the exit of its majority shareholder, Diageo,” he said.
Analyst and Head of Research at FSL Securities Limited, Mr. Victor Chiazor in an exclusive chat with Nairametrics anticipated market dynamics for the second half of 2024.
Chiazor expects a significant increase in capital-raising activities, driven by the recapitalization mandate for banks issued by the Central Bank of Nigeria (CBN) and additional capital raises by companies in sectors such as the brewery industry.
“This, along with expectations of interim dividends, will drive activity higher in the third and fourth quarters,” Chiazor stated.
He also highlighted that market momentum will likely be company-specific adding that companies in the consumer goods sector and others exposed to foreign exchange losses may see their share prices stagnate in the latter half of the year.
Head of Fixed Income at Chapel Hill Denham, Mr. Oladipo Ajayi also speaking with Nairametrics exclusively said that he expects significant activity due to the banks’ recapitalization exercise, with Fidelity Bank leading the way and more banks anticipated to follow.
“There will be a lot of activities in the capital market because of the banks’ recapitalization exercise which Fidelity Bank is already in the lead. We are expecting that more banks will join, creating substantial activity in the primary market,” Ajayi remarked.
He also predicts that the country’s currency will begin to stabilize in the forex market, which will positively impact the capital market by attracting investors back.
This stability according to him will also benefit manufacturing firms that have been incurring foreign exchange losses, helping them return to profitability.
“I also expect that the country’s currency will start having stability in the forex market. This will be positive for the capital market because it will attract investors back to the market.
It will also be positive for manufacturing firms that have been booking FX losses, enabling them to return to profitability,” Ajayi added.
Managing Director / CEO. Arthur Stevens Asset Mgt Limited and former CIS President Mr.Tunde Amolegbe have projected significant shifts in the capital market for the latter half of the year.
Amolegbe anticipates that the issuance of shares by banks, driven by the banking recapitalizations mandated by the Central Bank of Nigeria (CBN), will dominate the market.
“I believe the capital market in the second half of the year will be dominated by the issuance of shares by banks, in fulfilment of the banking recapitalizations mandated by the Central Bank of Nigeria (CBN). As a result, I expect primary market activities to take precedence over the secondary market,” Amolegbe stated.
He further noted that this trend could lead to a bearish market for the remainder of the year. Nonetheless, Amolegbe expressed confidence in the stability of the fixed-income market.
“I also anticipate that the fixed income market will remain stable, as the expectation is that the Monetary Policy Committee (MPC) might slow down its tightening stance with the slowing inflation rate,” he added.
Executive Vice Chairman, of Hicap Securities Limited, Mr. David Adonri also provided his outlook for the equities and debt markets in the second half of 2024.
According to Adonri, the equities market is expected to be particularly active in the primary market, driven by the ongoing banking recapitalization exercise.
He also anticipates sustained momentum in the secondary market, supported by the impact of quarterly results and interim dividends.
“There is likely to be sustenance of good tempo in the secondary market in the period due to the impact of quarterly results and interim dividends,” Adonri stated.
Additionally, Adonri foresees the debt market remaining attractive in the latter half of the year, with rising yields reflecting the recent hikes in interest rates.
