Experts explain persistent decline in equities market


The Association of Capital Market Academics of Nigeria (ACMAN) has attributed the current lull in the Nigerian Stock Exchange (NSE) to profit taking by domestic and foreign investors.

ACMAN President, Prof. Uche Uwaleke, said this in an interview on Monday, while reacting to the persistent lull in the nation’s bourse.

Uwaleke said the sell pressure was the result of profit taking by domestic and foreign investors, which began in February.

“This should be expected because stock prices were quite high in January with the NSE All-Share Index recording over five per cent appreciation, still above NTB yields,” he said.

Uwaleke attributed the negative sentiment to uncertainties in the macro economy, especially with respect to the direction of exchange rates and interest rates.

“With rising inflation, investors’ expectations of a rise in fixed income yields and possible devaluation of the naira given the persistent foreign pressure are triggering portfolio rebalancing in favour of other asset classes.

“Recall that it was the low interest rate environment fostered by the Central Bank of Nigeria last year that boosted stock prices.

“So, the return of the bulls will happen with stability in the macro economy involving stable exchange rates and low interest rates,” Uwaleke said.

He, however, urged regulators and market operators to continue to push out the message that panic selling was not in the interest of investors.

Also speaking, the Chief Operating Officer, InvestData Ltd., Mr Ambrose Omordion, said the market was expected to correct itself after a sharp rally witnessed in 2020 and early 2021.

Omordion said the fundamentals of the market were changing due to rising yields in the fixed income market, which triggered outflow of funds from equity assets.

He expressed optimism that the current trend would be reversed, saying that uptrend in the money market and bond yield was not enough to put the stock market down.

Omordion said both investment windows would coexist in the uptrend as oil prices were trading above 70 dollars.

He called on investors to change their investment strategies and concentrate on sectors and industries with capacity to grow their earnings in the long run.

“Pull backs and profit taking are integral to the stock market anywhere in the world.

“There is no cause for panic, corporate earnings are revealing strength that can support prices, if all these policies mismatched and summersaults are corrected, the market will rebound,” Omordion said.