Market analysts have projected a period of heightened volatility for the Nigerian equities market in the second quarter (Q2) of 2024, citing factors such as increased fixed income yields, rising inflation, and other macroeconomic challenges.
The market experienced robust growth in Q1, with returns surpassing 39.84 percent or N18.203 trillion. However, it is anticipated to encounter challenges in Q2, 2024.
April saw equities trading starting on a negative trajectory, reflecting the broader sentiment among market participants. This sentiment was influenced by ongoing efforts to digest corporate earnings releases and portfolio rebalancing endeavors based on anticipated earnings for Q1, 2024.
The market performance in Q2 thus far has seen the overall market performance measure, the All-Share Index (ASI), decline by 1.45 percent, closing at 103,046.99 points as of April 8, 2024, compared to 104,562.06 points at the end of March 28, 2024. Additionally, market capitalization dropped by N844 billion to close at N58.277 trillion on April 8, 2024, from N59.121 trillion at the beginning of April.
Analysts are expecting a slowdown driven by rising fixed income yields resulting from Central Bank of Nigeria (CBN) rate hikes and potential dilution of banking stocks due to the recently announced recapitalization exercise. Gbolahan Ologunro, Portfolio Manager at FBNQuest, remarked that the bullish momentum of Q1 is anticipated to substantially slow down in Q2.
Ambrose Omordion, Chief Operating Officer of InvestData Consulting Limited, noted that the stock market commenced the new quarter on a bearish note amidst mixed corporate earnings and dividend announcements. He anticipated mixed sentiment and profit-taking activities, driven by portfolio rebalancing efforts and expectations of higher yields in the fixed income market, despite rising inflation in Q2.
Analysts at Cowry Asset Management Limited expressed cautious optimism for the coming weeks, observing that market participants would closely monitor recent policy pronouncements by economic authorities and economic data to navigate effectively. They advised investors to focus on stocks with solid fundamentals.
David Adnori, Vice President of Highcap Securities Limited, highlighted that the earning season is winding down, and market performance may not see significant bullish trends until the release of half-year results of listed companies. Attention is expected to shift to the primary market, where banks and other issuers are anticipated to raise funds.
