A head of next week (precisely on April 29, 2016) when Morgan Stanley Capital International (MSCI) would announce the outcome of its clients consultations on the ease of capital flows in Nigeria, the buy-side at Nigeria’s equities market remains weak.
MSCI would be deciding if Nigerian constituents in its Frontier Markets Index will be part of the Semi-Annual Index Reviews (Rebalancing) due by May, 2016.
In the wake of the announcement of MSCI concerning a possible exclusion of Nigerian equities from its frontier market indexes, the Nigerian stocks traded bearish through last week –the NSE ASI declined 240basis points (bps) week-on-week (w/w). The NSE All-Share Index depreciated by 2.40percent to close last week at 24,719.27 points while market capitalisation declined to N8.503 trillion.
All other Indices finished lower during the review week, with the exception of the NSE Premium Index, NSE ASeM Index, NSE Banking Index, NSE Insurance Index and the NSE Pension Index that rose by 0.45percent, 0.38percent, 0.31percent, 1.86percent and 0.55percent respectively.
The feedback from MSCI consultations with its clients also forms part of the basis for its next country reclassification due by June, 2016.
In addition, stock investors are weary of increasing bet on Nigerian equities as first-quarter (Q1) earnings season which has kicked off berths with expected weaker earnings by listed companies.
Among others, UBA, Zenith Bank Plc, Unilever Nigeria Plc, Trans-Nationwide Express Plc, Ecobank Transnational Incorporated plc, Africa Prudential Registrars Plc, and United Capital Plc have released their first-quarter (Q1) to March 31 results.
“Whilst we highlight the modest improvement in investor sentiment as indicated by sustained rise in market turnover, we expect the mixed trading pattern (with a bearish bias) to persist in the week ahead as we anticipate more uninspiring Q1’16 earnings – particularly from the banks”, said research analysts at Lagos-based Vetiva Capital Management Limited.
Though oil prices steadied early this week as a strike in Kuwait offset concern over producers’ failure to agree on a plan to curb global supply at a meeting in Qatar, market watchers believe that concerns over the possible economic impact of falling oil prices, weak growth in China and disappointing corporate results have dogged investors for much of this year.
“The equity market may continue in the bearish terrain this week, barring any change in the prevailing fundamentals”, said research analysts at Lagos-based investment house, Dunn Loren Merrifield.
Investors booked profits amid panic sell-offs driven by a combination of the knock-on impact of recent MSCI announcement as well as ongoing domestic macro concerns, said market analysts at United Capital plc.
“We expect to see some Q1-16 results hit the market this week, although we think market reaction to these results will be mostly muted as investors continue to grapple with plausible impact of on-going struggles on the domestic macro front. We think the current bearish run in equities will likely extend this week, although at a more measured pace than past week”, the analysts added.
“The poor performance in the market in recent weeks maybe attributed to selling pressure by investors exiting the market in search for higher returns elsewhere. We expect anticipate that the selling pressure may continue on the back of the ongoing consultation to exclude the local bourse from the Morgan Stanley Capital International Frontier Markets Index,” Rotimi Peters-led team of economic intelligence at Access Bank plc said in their recent market outlook.
Iheanyi Nwachukwu
