Political uncertainty, foreign investors exit down equities market by N210bn in 7 months

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L-R: Chair, The Partnership for Maternal, Newborn & Child Health, Graca Machel; 6th President of Mauritius, Ameenah Gurib-Fakim; GMD/CEO, Access Bank Plc, Herbert Wigwe; Nigeria's former Minister of Education, Oby Ezekwesili and CEO, Ecobank Foundation, Julie Essiam, at the ACT Foundation funded African Philanthropy Forum Conference in Johannesburg, South Africa on …Wednesday

…losses N457bn in July

Stories by Kayode Tokede

The equities market segment of the Nigerian Stock Exchange (NSE) dropped by N210 billion in seven months of this year and loss N457 billion in July active trading amid political uncertainty and foreign investors exit.

The equities market opened this year at N13.619 trillion and closed July at N13.409 trillion, representing a decline of 1.54 per cent.

Similarly, The NSE All-Share Index has depreciated by 3.20 per cent or 1,225.41 basis points to 37,017.78 basis points from 38,243.19 basis points the equities market opened for trading this year.

According to NewsDirect investigation, the equities market witnessed significant increase in foreign and domestic investors sell-offs in July amid impressive corporate earnings by listed blue-chips companies on the Exchange.

For July trading on the NSE equities market, the All Share Index dropped by 1,260.77 basis points to close at 37,017.78 basis points from 38,278.55 basis points it opened for trading.

The market capitalisation of equities listed on the NSE fell by N457 billion in July as bearish sentiments continued to put pressure on the bourse’s performance.

The weak trading during the period under review was obvious in the 22 trading sessions in July on the NSE, as sell-offs lasted for 13 days and up in just nine, thereby continuing the six months of decline.

Capital market had attributed the sell-offs to a combination of low liquidity, capital outflows, mixed performance of listed companies and political uncertainties.

Others include, the delay in passage, assent and possible implementation of the 2018 budget, as well as the declining buying pressure as revealed by volume traded for the period.

The positive economic data emanating from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) before now have been ignored by smart money investors that kept selling down their positions.

The Managing Director, Cowry Assets Management Limited, Mr. Johnson Chukwu explained to Nigerian NewsDirect that the nation’s economy is facing domestic and foreign challenges.

According to him, “Nigeria economy is facing internal and external challenges. At a moment, Nigeria is facing political risk and foreign investors who are the major participants are not aggressive in the nation’s equities market.

“Also, Investors prefer to trade in fixed income instruments rather than equities market where the yield is attractive.

“Foreign investors pulling out as a result of reforms in monetary policies in Western Countries- The United States Reserves bank and the Bank of England have normalized interest rate which is part of what is discouraging foreign investors to come into the nation’s equities market.”

Reviewing the remaining half year of 2018, he explained that equities market performing would not change but there will be economy stability.

“Second half of 2018 will witness more political activities and we expect the US Federal Reserve to increase interest this year. We will actually see more pressure at the foreign exchange market in H2 which may force CBN to mop-up and interest on Treasury bill will go up. We don’t expect the equities market to improve unless other activities evolve that are not currently in review,” he explained.

Across sectors, performance was equally negative as the alternative market index, lost the most with 14.71 per cent. Industrial Goods followed with a monthly decline of 11.36 per cent, the NSE Pension index shed 6.77 per cent, Consumer Goods down by 5.08 per cent, while Mainboard index lost by 4.51 per cent.

For the month under review, the NSE30 index shed 4.25 per cent, NSE Banking lost 3.78 per cent, NSE50 depreciate by 3.70 per cent and NSE Lotus dipped by 3.34 per cent. Also, the Oil and Gas index recorded 1.90 per cent decline, just as the insurance index slipped 1.83 per cent.

A further breakdown of the month performance showed that, 17 stocks appreciated in price, while 95 stocks declined. Looking at the high capitalised stocks that decline during the month, Lafarge Africa lost 32.84 per cent, after posting a less than impressive half year result, PZ Cussons shed 27.05 per cent, Forte Oil declined by 23.74 per cent, MRS Oil lost 16.64 per cent, while International Breweries shed by 12.63 per cent. Beta Glass lost 10.83 per cent, Flourmills Nigeria depreciated by 10.31 per cent, Nigerian Breweries shed 8.06 per cent, among others.

On the gainers list, Cutix topped with 46 per cent, helped by the higher dividend payout and bonus of one-for-one share held. CCNN followed, gaining 29.17 per cent, helped by positive market sentiments and improved numbers, while C&I Leasing jumped 17.87 per cent on news of foreign company taking a stake, despite the proposed share reconstruction ahead of right issue.

Continental Reinsurance, Aiico Insurance, Vitafoam, Seplat Petroleum Development Company, Custodian investment, Law Union and Sterling Banking closed the period better at 16.55 per cent,16.29 per cent,11.11 per cent, 8.31 per cent, 6.45 per cent, 6.38 per cent and five per cent respectively.

Hitherto, the equities market had gained N1.38 trillion in first three months of 2018 as price of blue-chip companies appreciated over stability in foreign exchange market.

Nigerian equities had ranked within the top 10 best-performing equities markets globally in 2017 with average full-year return of 42.30 per cent, equivalent to net capital gain of about N4.36 trillion.

The ASI, which also doubles as Nigeria’s sovereign equities index, had opened 2017 at 26,874.62 basis points and closed the year at a high of 38,243.19 basis points.

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