From May to July 2023, the market buzzed with a significant number of equity transactions. However, this high activity level surprisingly slowed down in August, with total transactions falling by a substantial 62.65%. Additionally, foreign investors, who initially showed increased interest post the inauguration of the new administration, have seemingly pulled back, as evidenced by the waning participation witnessed in July and August.

So, why such a drastic drop-off in August equity transactions?

Generally, market momentum is fuelled by expectations and available information. The inauguration of the new administration, combined with its promising policy direction, initially encouraged a market rally. However, without new drivers or information, and increasing uncertainty surrounding the new policy implementations, the transaction volumes understandably eased off in August.

Interestingly, this isn’t a situation unique to Nigeria. The markets worldwide are also grappling with a global cost of living crisis, further intensified by supply chain constraints emanating from the Russia-Ukraine crisis.

Does the decline in interest from foreign investors signal potential issues?

While the rise of interest rates in developed economies and more anticipated rate hikes might have steered foreign investors away from international investments, this trend doesn’t spell immediate trouble. Our market has been primarily domestic driven since 2019. Still, with effective economic policies that stimulate growth, there’s potential for regaining foreign investor interest and participation.

Will we see a continuation of this declining trend in September and October? Performance figures for Q3 will be released in October, potentially triggering renewed market activity. However, barring any significant news that could influence the outlook of listed firms, it’s expected that the market may remain relatively quiet for some time.

What does this imply for your stock investment?

These market trends could present buying opportunities for long-term investors. As prices fall, stocks of good companies may become available at lower costs. However, patience is necessary as there may be short-term volatility.

The Nigerian stock market saw positive growth across various sectors in H1 2023. The Banking and Oil & Gas sectors were the top performers, with impressive increases of 60.5% and 101.4%, respectively. The Insurance, Consumer Goods, and Industrial sectors also demonstrated significant growth, with increases of 49.5%, 45.0%, and 18.4%, respectively.

In keeping with their promise to link investors to choice investment opportunities, Parthian Securities Limited and i-invest held the January 2023 edition of their Bears & Bulls Series themed “An Investor’s Guide to Building Wealth on the Nigerian Exchange”. The online investment clinic which held on the 18th of January 2023 offered investors free insights and analysis on the Nigerian equities market.

Speaking at the investment clinic, Head of Investment Research at Parthian Securities Limited, Oluwaseun Dosunmu, reminded investors that true to Parthian Securities’ earlier market predictions last year, the Nigerian equities market defied the odds in 2022, posting an upbeat performance despite the risk-off sentiments that rattled the global equities market.

He stated that the global central themes of 2022 were the Russian-Ukraine war, the zero covid policy in China, high crude oil prices, elevated inflation rates and the hawkish stance adopted by most central banks which made major economies experience a slowdown in economic activities, resulting in high cost of living and doing business. The Nigerian economy didn’t do better either as the key macroeconomic numbers were disappointing.

He forecasted that in 2023, the dominant events of 2022 will likely persist albeit with a mild twist. For the global economy, the tightening by the central banks would likely persist at a slower rate while in Nigeria, the forthcoming elections would ultimately determine the next direction of the foreign exchange (FX) market. In addition, it is expected that the inflation rate would decline due to the high base effect of 2022.

In addition to a credible and fair election, he listed low-interest rates, new listing/capital market reforms and strong corporate earnings as some of the factors that would drive market performance in the year.

“We are optimistic that in 2023, the equities market would continue the positive momentum driven largely by the dominance of domestic investors, better corporate earnings and lower interest rates. Favourable FX policies and a peaceful election would likely get foreign investors trooping into the country in 2023,” he said. He further explained that this is the right time to buy stocks as many investors would likely return to the market after the February presidential election, thus pumping the prices of equities.

Dosunmu cautioned that on the downside, continued monetary tightening, election violence and poor earnings of listed equities could trigger a negative outcome. He projected that 2023 will experience a continuous but slower monetary tightening and bullish oil prices, adding that some of the issues that defined economic performance last year would continue in the year but with some moderation.

According to the analyst, in 2022, Airtel and Seplat led the performance of the Nigeria equities with 71.2 per cent and 69.2 per cent returns respectively, followed by BUA Foods, BUA cement, and Geregu Power which was newly listed. He picked Airtel and Seplat again, alongside MTN, Zenith Bank, UBA, Nestle, Dangote Cement and Lafarge as stocks to watch this year with Nigerian Breweries and Total Energies also making the list.

Also, Chief Operating Officer of i-invest, an investment app of the Parthian Group, Tobi Olusoga, enjoined investors to consider flexibility and diversification in the management of their investment portfolios. She explained that i-invest would help investors to achieve this in a safe, secure, and convenient way.

“With i-invest, investors can access an array of competitive investment opportunities such as Treasury Bills, Commercial Papers, Fixed Deposit Notes, Eurobonds, and much more. They can also buy and sell shares on the Nigerian Exchange (NGX) without the aid of a broker, create one-off or reoccurring saving plans and accrue interest at attractive rates,” she said.

Bears & Bulls Series is an initiative of Parthian Securities, a subsidiary of the Parthian Group, created to empower people looking to invest in the equities market with the vital knowledge and resources to help them ace their investment goals and make valuable gains.

Despite the challenging operating environment which pushed up distribution and administrative expenses, the performance of most of the oil and gas companies in Nigeria has been impressive in the nine months to September 2022. The combined earnings of the oil and gas marketing companies listed on the stock exchange increased by more than 38%.

Here are our thoughts on the financial performance of the sector and the outlook for the rest of 2022.

What caused the spike in the sector’s performance?
The oil sector witnessed an improved performance, mainly due to growth in key revenue lines (the sale of petroleum products and lubricants). The major revenue growth driver was higher oil prices in 2022 compared to previous years. The geopolitical tensions between Russia and Ukraine also provided a boost to crude oil prices this year, as oil prices reached a peak of $127/barrel.

Looking ahead, what should we expect from the sector?
The expectation is that oil and gas companies will do way better than what they did in 2021 as some of them have already generated higher revenues and achieved over 90% of the 2021 full-year revenue in the nine months to September 2022. Nonetheless, the declining international crude oil price remains a downside risk and would be determined by OPEC+ output cuts in their November 2022 meeting and the crude oil demand from China.

Why you should invest in Oil & Gas Stocks
Oil and gas stocks can produce significant capital gains through share price appreciation and attractive dividend income when crude oil prices rise. In times like this, oil companies tend to generate gushes of cash which provides them with more funds to increase oil and gas production, repay debt, repurchase stock, and pay dividends, all of which can increase shareholder value.

How to invest in Oil & Gas Stocks
If you’re looking to add oil and gas stocks to your portfolio, here are the nine oil marketing and production companies listed on the NGX (Nigerian Exchange): Ardova Plc, Conoil, Eterna, Japaul Gold and Venture, MRS Oil Nigeria, Oando, Seplat Energy, Total Nigeria, and Capital Oil.

You can invest in any of these companies directly on the i-invest app or contact us via info@parthiansecuritiesng.com

Source: Parthian Securities Research.

If you’ve never heard the phrase “investing ethically” fret not, you are not alone but today will be the end of all of that. In this article, we’ll be discussing what ethical investing is, the types of ethical investments and how you can access them.

Ethical investing involves choosing companies or funds to invest in based on your values. These values could be moral, social, political, environmental, religious or any ideology that you care about. These values, whatever they may be, make up the main filter for the selection of investment options in ethical investing.

Why Ethical Investing?

Although ethical investing depends on the investor’s views, ethical investors generally choose investments that have a positive impact on the world while also aiming to make a profit. For example, the earliest recorded instance of ethical investing was by the 18th-century Quakers, who restricted members from spending their time or money in the slave trade.

These days, ethical investing primarily centers on impacts on the environment and society such as climate change, renewable energy, and animal testing. As more and more people are increasingly conscious of the fact that the fate of our planet rests in our decisions, investments in businesses are increasingly ethically conscious. This is to contribute, in every possible measure, to fostering environmentally and socially conscious companies to ensure we build sustainable systems of living.

Companies involved with stigmatized activities, such as gambling, alcohol, smoking, pollution or firearms are in turn avoided in this context of ethical investments. Certain companies may not market products that are stigmatised but they engage in unethical business practices such as; poor working conditions, sexual harassment, discrimination, false product claims, bribery and selling customer data. These companies can be seen to carry social stigmas, rightfully so, and therefore do not enjoy the patronage of ethical investors. That should show ‘em.

Types of Ethical Investments

Selecting investments based on ethics, however, offers no guarantee of performance. The following investments, whose terms have been used interchangeably in the investment sector, fall under the umbrella of ethical investing:

1. Impact investing: is an investment strategy that aims to generate specific beneficial social or environmental effects in addition to financial gains. The point of impact investing is to use money and investment capital for positive social results. Investors who follow impact investing consider a company’s commitment to corporate social responsibility or the duty to serve society positively. Socially responsible investing (SRI) and environmental, social, and governance (ESG) investing are two approaches to impact investing. According to the Global Impact Investing Network, more than 88% of impact investors reported that their investments met or exceeded their expectations.
2. Socially responsible investing (SRI): this is any investment strategy which seeks to consider both financial return and social or environmental good to create social change regarded as positive by proponents.
3. Environmental, social, and governance factors (ESG): this is a set of standards used by socially conscious potential investors to screen a company’s behaviors.

1. Environmental criteria screen how a company performs as a custodian of nature, in matters such as climate change, energy emissions, carbon footprint, water use and conservation, waste management and resource depletion.
2. Social criteria examine how a company manages its relationships with employees, suppliers, clients, and its immediate community in areas such as employee relations, human rights, diversity within hiring, inclusion programs and impact on communities.
3. Governance criteria deal with how a company is managed or “governed” for driving positive change. It covers assessing the quality of its management and board, shareholder rights, executive pay and diversity, and overall transparency and disclosure.

1. Sustainable investing: This ensures that businesses aren’t judged solely on short-term financial gains but on a bigger picture of what and how they contribute to society, this in turn encourages companies to embrace sustainable principles, which can provide long-term social and financial gains. This concept is embodied in the idea that, in addition to focusing on financial performance and generating profit, organizations should measure their social and environmental impacts.
2. Halal investing: This refers to the investment of money in accordance with Islamic finance principles which is centered on the concepts of social justice, ethics, and using finances to help build communities. An example of halal investing is Mudarabah, an Islamic finance technique in which a lender or investor and a borrower or investment manager establish a profit-sharing partnership to undertake a business or investment activity. Under this structure, the investor provides the financing or funds, and the investment manager provides the professional, managerial, and technical know-how to carry out the business or manage the investment. The investment manager must invest the funds on a Sharia-compliant basis (for example, the funds cannot be invested in prohibited (haram) products or activities such as tobacco, alcohol, or gambling).

How to Start an Ethical Investment in Nigeria

Using an investment platform like i-Invest makes it easy to buy shares or funds. On this platform, there are a few different ways to invest ethically. You could pick your own stocks under ‘Equities’ and create your own ethical portfolio by buying shares or bonds yourself that you believe fit your own beliefs and values, or you can invest directly in the Modarabah fund.

Click here to get started with ethical investing.

Saying ‘Bears and Bulls’ in the voice of Shuri in Black Panther sounds like some wild animal fight. Hehe, but in the stock market, Bull markets (also known as Bull Run) occur when prices are on the rise for sustained periods, and Bear markets occur when stock prices fall 20% or more for a sustained period. Simple enough, yes?

On a simple note, the following analogy can help you remember the difference: A bull has horns that are most often pointing upwards, and you can relate that to rising stock prices. A Bear on the other hand, when not threateningly on two feet, is often facing downwards on its four paws. You can relate that to falling stock prices. It is not a perfect analogy, but it could work to help you remember the differences.

The financial market is greatly influenced by investor confidence – how investors perceive and react to the market affects whether the market will rise or fall.

In bull markets when prices are rising, it shows that investors’ confidence is rising as well. Bull markets often occur in times of economic prosperity, thriving companies, and high levels of employment. Investors are confident that there will continue to be an upward trend, this results in more consumers holding onto their shares, high stock prices and a low supply of equities to be bought resulting in a buyers’ market.

Bear markets are just the opposite, as they occur when stock prices fall 20% or more for a sustained period. It is often seen in periods of economic downturn and high levels of unemployment. Bear markets are fueled by fear, leading to an increased desire by investors to sell, increased availability of equities, low prices, and therefore a sellers’ market.

To further elucidate, let’s explore some examples.

The Great Depression was a severe worldwide economic depression between 1929 and 1939 that began after a major fall in stock prices in the United States. The 1929 stock market crash resulted in an almost 90% loss in the value of stock prices.

The bull run of the US stock market that lasted from 2009 to 2019 is one of the longest in recent history with the value of stock prices rising by more than 323%, this was of course just before COVID-19 hit the entire world like a brick in the face.

In a bull market, many investors wish to buy securities, but few are willing to sell them. One way to gain from a bull market is to invest early when stock prices are low and sell before they reach their peak. When you have a high and diverse number of equities on hand in a bull market, you stand a higher chance to benefit.

In a bear market, when prices continually fall, investors flee to the safety of fixed-income securities. Investing in equities at this time is a risk that can result in a massive ‘breakfast’, and you don’t want to get served. Although prices are low and readily available to be bought, it’s difficult to determine with any certainty if and when they will rise.  Parthian Securities daily newsletters help you keep track of the rise and fall in the market and how you can benefit from them. Click here to subscribe.

Investing in equities, in any type of market, is a risk that can often be rewarding but can also be the opposite of that. It is safest to trust a professional with your investments. Parthian Securities Limited is a leading and trusted financial securities company that deals in various financial markets, investment advisory services, research on securities and companies, and other value-added services.

Follow who know road. If you’re ready to start investing and would like to be guided by a trusted professional, click here.