COVID-19: Equities market sheds N399bn in one week

…Investors FX weekly turnover declines to $233.6m

…As external reserves dip by $3.02bn in Q1

As investors continued to take profit over Coronavirus pandemic that has significantly affected the global economy, the equities market of the Nigerian Stock Exchange (NSE) last week dropped by N399 billion to close at N10.994 trillion from N11.393 trillion it opened for trading.

Also, the Investors’ and Exporters’ (I&E) FX Window at the close of trading activities for the week under review stood at $233.66 million as against $299.16 million recorded from 24th to 27th of March, 2020.

Considering the equity market closing figures, the NSE All-Share Index (ASI) depreciated by 3.51 per cent to close the week at 21,094.62 basis points from 21,861.78 basis points it closed for trading last week.

Statistics showed that all other indices finished lower with the exception of NSE Oil/Gas which appreciated by 2.33per cent while NSE ASeM Index closed flat.

The YTD return of the market settled at -21.4per cent.

In fact, the sectoral analysis revealed that the banking recorded significant losses of -5.3 per cent and Consumer Goods -3.9 per cent sectors, were the primary drivers of the weak market performance.

Also, marginally losses were recorded in the Industrial Goods (-1.7 per cent) and Insurance (-0.3 per cent) indices. On the other hand, the Oil and Gas (+2.3 per cent) sector was the sole gainer, however, given the magnitude of losses recorded in other sectors, it was not enough to turn the tide.

In all, 15 equities appreciated at price during the week, lower than 34 in the previous week with 36 equities depreciated in price, higher than 30 equities in the previous week, while 112 equities remained unchanged, higher than 99 equities recorded in the preceding week.

However, a total turnover of 1.534 billion shares worth N11.267 billion in 18,928 deals was traded this week by investors on the floor of the Exchange, in contrast to a total of 1.452 billion shares valued at N14.918 billion that exchanged hands last week in 21,828 deals.

The Financial Services industry (measured by volume) led the activity chart with 1.105 billion shares valued at N7.100 billion traded in 12,225 deals; thus contributing 71.99per cent and 63.02 per cent to the total equity turnover volume and value respectively.

Trading in the Top Three Equities namely, Sterling Bank Plc, Zenith Bank Plc and Meyer Plc. (measured by volume) accounted for 752.359 million shares worth N3.247 billion in 4,039 deals, contributing 49.03 per cent and 28.82per cent to the total equity turnover volume and value respectively.

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A total of 6,759 units valued at N61, 035.98 were traded this week in 19 deals, compared with a total of 20 units valued at N130.90 transacted last week in 2 deals, with a total of 10,100 units of Federal Government Bonds valued at N11.145 million were traded last week in 2 deals, compared with a total of 28,527 units valued at N29.950 million transacted the previous week in 18 deals.

Commenting on the equity market loss, analysts at Corodros capital said: “In our view, the trend witnessed this week is likely to persist, as weakened market sentiments are expected to pressure market returns.

“Nonetheless, we advise investors to take a position in fundamentally justified stocks”.

Consequently, the I&E FX window on Monday 30th of March, 2020 recorded transactions turnover of $34.38 million, the same amount was declared on Tuesday but moved up to $74.94 million on Wednesday, however, declined significantly to $10 million on Thursday before closing the week high on Friday at $74.51 million.

The Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, had disclosed that the I&E forex window had helped to stabilize the volatility of the Naira against other currencies. In fact, it was believed to have encouraged the willing-buyer, willing-seller, which has allowed foreign investors to bring in more foreign exchange.

Meanwhile, the nation’s external reserves have continued its downward trend dropping by $3.02 billion from $38.53 billion on January 2, 2020, to $35.51 billion as of March 27, 2020, the latest statistics from revealed.

According to the figures, the foreign exchange buffer dropped from $39.8 billion on November 11, 2019 to $39.24 billion on December 13, 2019. This is after the fall by $1.26 billion from $41.76 billion on October 2 to $40.5 billion as of the end of October.

The external reserves dropped by $482.18 million from N45.14 billion as of July 8 to $44.65 billion on August 8, 2019.

The CBN stated in its communiqué at its recent Monetary Policy Committee meeting that available data on key macroeconomic variables indicated the likelihood of subdued output growth for the nation’s economy in 2020.

It stated that based on the current downturn in oil prices, staff projections indicated that output in 2020 would be less than earlier envisaged.

The committee noted the weakened revenue position of the federal government, arising from the sharp drop in oil prices.

It reiterated the need for government to urgently reduce reliance on oil revenue by gradually diversifying the economy and improving its tax collection.

To this end, the MPC noted the speedy response of the Federal Government to the oil price shock with the revision of the 2020 budget downwards. It was reduced by N1.5trillion and the oil price benchmark dropped from $57 to $30 per barrel.

The CBN governor, Godwin Emefiele said the major downside risks to this outlook as “the continued spread of COVID-19; further decline in crude oil prices and the reduction in accretion to external reserves; reduced government revenue leading to weak aggregate demand; declining non-oil receipts; as well as infrastructural and security challenges.”

He said these headwinds would however be partly mitigated by the timely and effective response of the monetary and fiscal authorities in containing the spread of the COVID-19 viral infection.

The CBN governor also said it would be mitigated by the recalibration and adjustment of 2020 federal budget to the revised thresholds, while pegging expenditure to critical sectors of the economy and adoption of a new fiscal regime to encourage the build-up of fiscal buffers.

He said there would be sustained CBN interventions in selected sectors; enhanced flow of credit to the real sector and deliberate policies to diversify the Nigerian economy.

The committee further noted with concern the combined demand and supply shocks to the global economy arising from the outbreak of COVID-19 and the oil price war between Saudi Arabia and Russia.

It also noted the weakening performance of global output growth since January 2020, reflected in losses in global stock values; declining primary commodity prices and disruptions to the global supply chain associated with large-scale global lockdown of mega-metropolis and whole countries and social distancing.