The Nigerian All Share Index (ASI) ended August on a negative note, reflecting investor concerns over several macroeconomic challenges and uncertainty surrounding bank recapitalization efforts.
The ASI fell by 1.22% in August, marking consecutive monthly losses, as it also dropped by 2.28% in July. This two-month decline is the first of its kind since April 2023, indicating that bearish sentiment has taken hold of the market.
The NGX All Share Index, representing the performance of all listed stocks, saw its year-to-date return decrease to 29.1%, down from a high of 39.8% in March 2024. This decline was largely driven by losses in large-cap stocks within the NGX Premium Index. August was a challenging month for the market, with 50 stocks posting losses, while 64 stocks managed to gain, and the remaining stocks ended the month flat.
Top Gainers
- Oando Plc: Led the gainers’ chart with an astonishing 435.9% increase, including a 60.7% gain in the last week of August alone. This surge was fueled by positive news, particularly Oando’s acquisition of a significant stake in Agip’s upstream assets.
- Julius Berger: Recorded a gain of 74%, reflecting investor confidence in the construction giant.
- TotalEnergies: Posted a 73% gain, benefiting from favorable market conditions and strong operational performance.
Top Losers
- BUA, MTN, and BUA Cement: These heavyweights led the losses in August, significantly impacting the overall market performance.
- United Capital, Nestle, and Fidson: Also featured on the losers’ chart, with declines attributed to profit-taking activities and the impact of several dividend payments during the period, which often result in price adjustments.
Macro Challenges
- Inflation: The Bureau of Statistics reported a downward trend in the inflation rate, which is a positive signal for the economy. This suggests that some of the cost pressures facing businesses and consumers may be easing.
- GDP Growth: The Nigerian economy recorded a 3.19% growth rate in the second quarter of the year, the fastest second-quarter growth since 2021. This robust performance was driven by improvements in agriculture, manufacturing, and services sectors.
Investor Sentiment
Despite the positive macroeconomic indicators, the stock market’s performance did not align with the broader economic recovery. This disconnect may be due to lingering uncertainties, profit-taking after previous gains, and strategic shifts as investors prepare for the third-quarter earnings reports expected in October.
Additionally, a significant portion of retail investor inflows appears to have been diverted towards bank recapitalization efforts, with nearly a trillion naira raised in recent months. This shift in capital allocation has likely contributed to the muted performance in other sectors.
Credit: Nairametrics