Equities market sheds 16.15% amid economy challenges

Amid global and domestic economic challenges, the equities market of the Nigerian Stock Exchange (NSE) has recorded a depreciation of 16.15 per cent in 10 months of 2109.

The equities market this year has been on a negative trend coupled with the 2019 general elections that led to foreign investors’ exit, policy measures by regulatory bodies that have continued to down investors apathy, most especially in the banking and Insurances sectors.

For instance, the NSE All-Share Index (NSE ASI), an Index that tracks the general market movement of all listed equities on the Exchange, including those listed on the Alternative Securities Market (ASeM), regardless of capitalization in 10 months dropped by 16.15 per cent to 26,355.35 basis points as October 31, 2019, from 31,430.50 basis points it opened this year as most indices were on negative territory.

The NSE 30 Index that tracks the top 30 companies in terms of market capitalization and liquidity down by 24.5 per cent to 1,069.79 basis points from 1,417.15 basis points.

Our correspondent gathered that the NSE Banking Index depreciated by 21.5 per cent to 313.30 basis points as at October from 398.94 basis points while NSE Insurance Index dipped by nearly five per cent to 120.2 basis points from 126.48 basis points.

Sovereign Wealth Fund: Senate invites CBN to explain differential exchange rates for projects

Consequently, the NSE Oil/Gas Index dropped by 22.6 per cent to 233.83 basis points from 302.23 basis points as NSE Industrial Index depreciated by 16.3 per cent to 1,035.85 as at October 31, 2019 from 1,237.88 basis points it closed in 2018.

Other indices on negative territory include NSE Corporate Governance Index that closed at 939.79 basis points, 25.1 per cent below 1,254.34 basis points it opened this year while NSE Consumer goods index down by 31 per cent to 516.56 basis points from 748.83 basis points.

On the contrary, the market capitalization in 10 months gained N1.1trillion, attributable to listings of MTN Nigeria plc, Airtel Africa plc, among others. The market capitalization moved from N11.73 trillion it closed in 2018 to N12.83 trillion as at October 31, 2019.

Analysts said the equities market is still feeling the 2019 post-elections, stressing that the nine months corporate earnings of listened companies had little effect on investors’ apathy on fundamental stocks on NSE.

They predicted that the equities market this year might be closing on a negative note, maintaining that early passage of the 2020 budget by the federal government might revive the market.

In May, President Muhammadu Buhari signed the 2019 appropriation bill into law and the President was inaugurated for a second term in office. The President inaugurated the board of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) to formulate policies and strategies to boost revenue collection for efficient allocation to the various tiers of government.

The current administration has among major themes of its development agenda, diversification of the economy from crude oil. This has resulted in the encouragement given to non-oil exports, as part of the Central Bank of Nigeria (CBN) placed a ban on rice, among other items access to official foreign exchange window.

Analysts at Cordros Capital said, “In our view, the trend witnessed through the year is likely to persist through the final quarter of the year, although we expect pockets of gains over the final months of the year as fund and portfolio managers realign portfolios prior to the start of 2020. Nonetheless, we note that valuations remain attractive driven by price deterioration throughout the year. Hence, we advise that long-term investors consider appropriately timed investments.”

Nonetheless, we note that valuations remain attractive driven by price deterioration throughout the year. Hence, we advise that long-term investors consider appropriately timed investments.”

The Executive Vice-Chairman, Highcap Securities, Mr David Adonri said, the build-up to 2019 the general election had a negative effect on the capital market, stressing that post-election activities of the current administration worsen the situation, coupled with weak economic indicators.

He noted that the listing of telecommunication companies increase equities market liquidity but investors return remained negative.