Govt policy drives stocks market to 3.3% in 6 months

Trading on the Nigerian Stock Exchange (NSE) for the first half of the year 2016 closed on a slight gain of 3.3 per cent as the market capitalisation gained N314 billion within the six-month period, as analyst predicted that the Nigerian Bourse would experience a lift from the lull associated with it in the year 2015.

Last year, against projections, the Nigerian stock market closed with a negative full-year average return of -17.36 per cent, this implied a loss of N1.63 trillion in 2015, a trajectory loss of N3.38 trillion in the past two years, nearly a quarter of their market value of N13.226 trillion recorded at the beginning of the period, while ASI closed at 28,642.25 points as against its opening index of 34,657.15 points.

The All Share Index (ASI), the benchmark index that tracks prices of all quoted equities, indicated a negative full-year average return of -17.36 per cent. The ASI is a value-based common index that tracks prices of all quoted companies on the NSE. It is also Nigeria’s sovereign equity index as the barometer to measure the performance of the Nigerian investment market within a given period.

The Nigerian Stock Exchange (NSE) All-Share Index (ASI) closed at 29,597.79 on the last day of June, up from 28,642.25 at which it opened 2016. Market capitalisation added N314 billion, rising from N9.851 billion to close at N10.165 trillion. Last two weeks gain drove the market northward despite the flips that had been associated with stocks trading from the beginning of the year, attributed to different economic stances ranging from uncertainty in the economic direction as regards to delay in the 2016 budget, policy flip flops, exchange rate uncertainty, to accounts of profit taking by quoted companies on the exchange.

The market rebounded two weeks back following the new forex, policy bringing the year-to-date (YTD) growth to the positive territory. Analysts said but for the rebound the market recorded recently following positive reactions to the new flexible foreign exchange policy of the Central Bank of Nigeria (CBN), the market would have ended the first half on negative note just last like last year. A six-month analysis of the first half showed that the market benefited from the newly introduced market determined foreign rate policy which was a boots to investor confidence.

This lift in the market was adjudged the most rise stocks in the world by Bloomberg. “Volumes in the equity market have gone from about $8 million a day last week to more than $20 million. It’s a big increase, but it’s not all new foreign money coming in. A lot of the rally is down to local money being switched from the bond market to stocks,” Bloomberg had quoted Chris Becker, an analyst at Investec from Johannesburg.

Analysts, while reacting to the development in the Nigerian Capital market, however, noted that the future holds brighter prospects. “In the immediate, while we expect the ongoing optimism regarding a possible shift to a market-determined exchange rate regime to support market performance. We see the impacts of these events on market performance. However, in the medium to longer term, we see improved performance on the back of efficiency gains from an expansionary fiscal policy leading to improvement in aggregate demand,” analyst at InvestmentOne said.

Market operators, however remained optimistic that while the recent efforts of the government to salvage the economy may not translate into a sharp swing in the tide of things in the short-term due to huge confidence deficit impeding in the system, analysts anticipate that the overall impact of policy actions would be positive for the economy in the medium to long term.

According to analysts at Afrinvest Securities Limited, the second half of the year 2016 would be positive with the quantum of reforms that have been introduced over the last six months. “The economy is gradually shifting towards market based system in the allocation of scarce resources given the liberalisation of the downstream oil and gas sector and the introduction of flexibility in the foreign exchange market. In addition, the implementation of the 2016 budget, which is meant to reflate the economy and set it on a growth path, is one of the recovery catalysts we envision for H2:2016.”