WITH the growing uncertainty in the political space in the country over the forthcoming 2019 general elections, the bearish performance driven by negative investor sentiments is expected to continue throughout the month of September, stock market analysts predict.
According to Financial Derivatives Company, investors fatigue will continue as political uncertainty continues to grow and preference in Debt Capital Market (DCM) to Equity Capital Market (ECM) widens, even as analysts predict an increase in foreign portfolio investment as an expected increase in US Fed rate will further impose pressure on performance.
A review of the Nigerian stock market in August in comparison with South African and Ghanaian markets showed Nigeria was the worst performing amongst the three with a year-to-date loss of 8.88 per cent as at the end of August 2018.
The Johannesburg Stock Exchange had a year-to-date loss of 1.85 per cent as at August ending while Ghana’s Stock Exchange CI closed with a year-to-date gain of 7.86 per cent for the same period.
However, the Nigerian bourse, by the month of August 31, recorded a net FPI outflow of N38 billion with only five days that closed positive while 16 trading days closed negative.
Average volume of trade was 16 per cent down to 257 million units while the average value of transactions was 5.72 per cent down to N3.13 billion.
Only 17 stocks appreciated in price in the course of the month, 82 stocks lost, while 69 remained neutral.
Although all sub-sectors closed in negative territory, the banking sector recorded the highest loss of 8.64 per cent, largely due to poor performance of Skye Bank’s shares that went down by 13 per cent; Fidelity, by 17 per cent; and United Bank of Africa by 16 per cent. However, Insurance index improved a bit as it lost the least, closing the month 5.99 per cent lower than it opened driven by Universal Insurance, Continental Reinsurance and Cornerstone Insurance.
Speaking on the performance of the insurance sector in light of the recent recapitalisation introduced by the National Insurance Commission (NAICOM), Andy Tsaku, an equities trader at Kapital Care Securities said, “We are beginning to see a lot of activity around insurance stocks, but quite a number of insurance stocks apart from just a few are trading below 50 kobo levels.” “Going forward, if they are intending to raise capital in order to ensure that they exist at profitable levels and to also align with regulatory requirements, it is very likely that they will tow the lines of trying to do private placing so that they can raise monies in order to ensure that they remain in business,” he said.
For the week ended September 7, 2017, Nigeria’s domestic equities market sustained sell offs on market bellwethers dragging the benchmark index 2.33 per cent lower.
According to analysts at Afrinvest, the downtrend remains largely driven by the lingering uncertainties around the 2019 general elections which we expect to be sustained.
“Nevertheless, we maintain that the current trend is not necessarily a true reflection of the fundamentals of companies and we believe that opportunities still remain in the market. Consequently, despite the overall negative performance, there were periods of intraday gains during the week.”
The benchmark index declined on 4 of 5 trading days in the week, with the largest loss recorded on Wednesday, while the only gain in the week was on Tuesday.
On a W-o-W basis, the All Share Index fell 2.3 per cent to 34,037.91 points while year-to-date loss worsened to -11.0 per cent. Likewise, market capitalisation reduced N295.9 billion to settle at N12.4 trillion.
In the same vein, activity level weakened as average volume and value contracted 41.7 percent and 43.1 percent to 178.5 million units and N2.6 billion respectively.
Sector performance was also bearish as all indices closed in the red W-o-W. The oil & gas index depreciated the most, down 3.7 per cent W-o-W following losses in SEPLAT and OANDO while sustained sell offs in NIGERIAN BREWERIES and UNILEVER dragged the consumer goods index 2.7 per cent southwards.
Maintaining that the current bearish performance will be sustained as elections draw closer, analyst at Afrinvest however expect a “resurgence as the election euphoria settles. Hence, given current pricing in the market, we envisage opportunities for investors to take advantage of, albeit with a minimum investment horizon of a year.”
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