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1. Nigerian Capital Market at Crossroads; Working Towards a New Normal

Global Market Review

Positive global economic expectations were hindered by a slew of macroeconomic headwinds in 2022. Countries struggled with China’s zero COVID policy, Russia’s invasion of Ukraine, soaring inflation rates, supply chain disruptions, monetary policy tightening, and geopolitical instability. Thus, the economic environment proved quite difficult to navigate. 

US Markets: 

2022 marked the US markets’ worst year since the 2008 financial crisis as the S&P 500 sank 19.44%, ending a three-year win streak. The Fed's aggressive monetary policy measures were responsible for the poor investor sentiment. The Fed hiked rates seven times in a bid to moderate (sticky) inflationary pressures. Growth and technology companies also felt the regulatory authority's heavy hand, resulting in mass layoffs and slumps in valuation during the session. 

Additionally, the Russian-Ukraine war and China’s zero Covid policies caused supply chain issues as major companies had to relocate their production centers during the year.

The S&P 500 went green in Q4 2022 rising by 7.1% after consecutive declines during the year. However, the losses accrued in the first 9 months of 2022 crushed this mild recovery as there was a lot more pain than gain in the market. 

European Markets

Europe was largely affected by Russia’s invasion of Ukraine in February 2022. This created a domino effect as it caused supply chain disruptions leading to increases in food and energy prices which further elevated inflationary pressures in the region. Countries had to suppress these pressures through quantitative tightening and by increasing their debt profile.

As the price of essential commodities rose, the cost of living of nationals sunk leading to a decline in economic activity. Thus, unstable economies were severely affected as some such as the UK, slipped into a recession.  

Asia Pacific Market 

The Asian market weathered recessionary fears due to rate hikes, soaring inflation, and China’s unstable property market which grossly affected investor sentiment. China’s zero covid policy weighed heavily leading to huge selloffs in indices like the Hang Seng index. Uncertainties surrounding the Chinese government’s future policy direction led to increased foreign outflows.

India was the top performer in the market as the country served as a viable alternative for companies struggling with supply chain disruptions caused by China’s COVID zero policy. Despite global rate hikes, India’s Nifty 50 index recorded a strong growth of 4.8% as at end-year 2022. 

Global Market in Numbers 

The Global equities market indices tracked by Proshare closed the year in the red during the session. Out of the Thirty-two (32) stock markets under review, there were eight (8) gainers and twenty-four (24) losers. Argentina MerVal topped the list for the second consecutive year gaining +138.75%. Nigeria’s NGXASI and Chile’s IPSA completed the top three performers as they were up +19.98% and +12.43%, respectively in 2022. 

Meanwhile, Russia, USA, and South Korea topped the losers list as they sank by 43.32%, 33.44%, and 24.89%, respectively in the year ended December 2022.

Table 1: 

Top Global Gainers and Losers

Gainers

MerVal +138.75%

1. Argentine’s market ended the year on a positive note with a YTD increase of +138.75%
2. The Argentina MerVal ended the year 2022 with 199360.66 index points an upward tick from a previous index point of 83500.11.  
3. Argentina recorded an annual inflation rate of 94.8% in 2022 as it suffered from price hikes during the session. So, investors likely used the market to hedge against inflation. 

NGXASI +19.98%

1. The NGXASI shot up during the session to +19.98% from +6.07% in the 2021 trading session.
2. The Nigerian equities market closed the year with 51251.06 points as of December 2022.
3. Even as the country faced various threats, increased buying interest during the year accelerated market performance in 2022.

IPSA +12.43%

1. Chile’s stock market made a quick recovery in 2022 gaining 12.43% in 2022 from a YTD drop of -1.80% in 2021.
2. Investors responded well to the rejection of the proposed new leftist constitution. 
3. Commodity price rallies during the year also contributed to the positive economy.

NIFTY +4.82%

1. The equities market closed positive at 4.82% by the end of the trading session. 
2. The country served as an alternative investment hub due to China’s zero COVID policy.
3. Strong growth in the market was likely driven by growing domestic equity fund inflows spurred on by the risk-taking habits of India’s youthful population. 

Losers

MICEX Index -43.32%

1. Russia’s stock exchange crashed by over -40% in 2022 to 2146.7 index points. 
2. The threat of western sanctions and investor sentiment due to Russia’s invasion of Ukraine threw the market in disarray.

NASDAQ -33.44%

1. NASDAQ is a broad index that is heavily skewed towards the technology sector. 
2. The index recorded huge selloffs in 2022 as a YTD decline of -33.44%. 
3. Investor sentiment was bearish towards risky stocks during the session because of the contractionary stance of the Fed.  

KS11 -24.89%

1. South Korea’s KS11 saw a decline in activity to -24.89% in 2022 from a +3.63% uptick in the 2021 session. 
2. The country experienced modest growth levels in 2022 on account of cooling export demand, energy price swings, a sluggish housing market, and weaker disposable income. 

Taiwan Weighted Index -22.40%

1. The index closed negative 14137.69 index points representing a 22.40% Y-o-Y decline from 2021. 
2. Taiwan’s economy contracted on the back of declines in GDP, soaring inflation, and spillover effects of the Russia-Ukraine situation. 
3. Also, rising interest rates drove capital away from high-risk investments. 

Outlook for Global Markets

The slowdown in global economic activity and record-breaking levels of inflation in 2022 has caused analysts to remain cautiously optimistic. Global economic recovery is highly dependent on the monetary authorities tempering down their rate of monetary policy tightening, continued easing of China’s zero COVID policy, and the outcome of the Russia-Ukraine dispute.