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Financial experts predict shift in Nigerian capital market focus in Q2 2024

The Nigerian Exchange Limited (NGX) closed Q1 2024 on a high note, fueled by renewed investor confidence in listed companies.

The outstanding performance represents a significant achievement for NGX, notwithstanding prevailing economic adversities such as heightened inflation, currency depreciation, and ongoing security challenges.

This prevailing optimism has translated into discernible changes in purchasing patterns, resulting in the All-Share Index achieving a remarkable closure at 104,562.06 index points at the quarter’s conclusion.

Furthermore, the year-to-date (YTD) return of the NGX All-Share Index showed its resilience, standing impressively at 39.84% and ranked as the second best-performing in Africa, trailing behind the Zimbabwean exchange.

Despite the backdrop of escalating inflation, prospective interest rate adjustments, and volatile exchange rates, investor confidence has displayed remarkable steadfastness. This unwavering assurance has, in turn, spurred heightened market activity and intensified buying engagements.

This positive momentum has market operators brimming with optimism for a bullish and active primary market in Q2 2024.

The market operators who spoke with Naijaonpoint exclusively predicted that the primary market for equities may take center stage in Q2’2024 driven by the imminent takeoff of a banking recapitalization exercise.

They also believe that the equities market would be largely driven by corporate action around Q1’24 earnings and dividend payments for FY’23 results which will be announced and paid in Q2 2024.

However, they expressed doubt regarding the sustainability of the prolonged rally observed in the secondary market for equities

Mr. Adonri, Managing Director of Highcap Securities Limited, has forecasted significant changes in the dynamics of the Nigerian Capital Market for the upcoming second quarter of 2024.

He anticipates a notable shift in emphasis from the secondary market to the primary market, driven by the imminent takeoff of a banking recapitalization exercise.

In an exclusive interview with Naijaonpoint, Mr. Adonri emphasized the expected impact of the banking recapitalization exercise on the Nigerian Capital Market.

Adonri also expressed doubt regarding the sustainability of the prolonged rally observed in the secondary market for equities.

Analyst and Head of Research at FSL Securities Limited, Mr. Victor Chiazor also speaking with Naijaonpoint in an exclusive interview outlined his projections for the equities market, focusing on the influence of corporate actions surrounding Q1’24 earnings and dividend payments for FY’23 results, which are slated to be announced and disbursed in Q2 2024.

According to Chiazor, companies boasting impressive Q1’24 results and offering attractive dividend yields for FY’23 are poised to draw heightened investor interest, potentially driving up investment in their shares.

Conversely, Chiazor noted that companies with weaker earnings and lower dividend yields may experience comparatively subdued investor attention, particularly against the backdrop of the prevailing high-interest rate environment.

Conversely, Chiazor noted that companies with weaker earnings and lower dividend yields may experience comparatively subdued investor attention, particularly against the backdrop of the prevailing high-interest rate environment.

An Investment Banker and Stockbroker, Mr. Tajudeen Olayinka noted that that Q1 2024 showcased a commendable performance, particularly during the months of January and February, where significant gains were realized.

However, he noted that March 2024, while still positive for the index, was marked by socio-economic disruptions and profit-taking activities.

According to him, investors grappled with challenges stemming from high inflation and negative real returns in the fixed-income market, prompting the Debt Management Office (DMO) to issue Treasury Bills with yields exceeding 20% for one-year maturities.

In terms of sector performance, Olayinka highlighted the Industrial Goods and Consumer Goods sectors as standout performers in Q1 2024, surpassing market expectations.

Looking ahead to Q2 2024, Olayinka expressed optimism regarding the market’s prospects. He cited the Central Bank of Nigeria’s (CBN) continued efforts to stabilize the exchange rate of the Naira, supported by inflows from foreign portfolio investors and Diaspora remittances, as positive indicators for sustained market growth.

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