Nigerian stock investors who took positions in the market hoping to reap capital gains that earlier looked possible from traditional ‘Santa Claus’ rally are currently licking their wounds.
The stock market has lost approximately N2.4trillion this year, meaning that investors who chose to hold their stocks till date are in for desolate Christmas spend because of the market meltdown.
“While investor interest on select stocks remains evident, broad market sentiment has shown little sign of improving. Thus, we expect another mixed trading session, with a negative tilt”, Lagos-based Vetiva research analysts said in their Tuesday December 18 note.
At this time of the year professional/ retail stockbrokers and shareholders traditionally spice up their homes, buy cars or upgrade an old one, pay school fees and also show kindness to family members by taking some profit on capital gains. It is less than four (4) trading days to Christmas.
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The stock market’s negative performance has persisted lately amidst growing political concerns ahead of the 2019 elections, and absence of a positive market trigger.
Despite some analysts’ positive outlook for stocks in December, the market rather got off to a quiet start in the first week of the month.
The All Share Index (ASI) has declined to a low of 30,728.32 points as at close of trading on Tuesday December 18, 2018, representing year-to-date (ytd) return of negative 19.4 percent.
“We think the market loves December because it is a month where players begin to trade their optimism about the New Year. It is also a month where portfolio managers – looking to re-balance their portfolios – take position ahead of year-end reporting,” said Lagos-based research analysts at United Capital Plc in their November 28 commentary.
The value of listed Nigerian equities which had opened the year 2018 at N13.609trillion, increased to N15.896 trillion as at end of January; and rallied further to a record high of N16.019trillion as at end of June, but touched a new low of N11.221trillion as at Tuesday December 18.
The continuing bearish reign at the Nigerian Bourse comes on the heels investors expecting to take position in fundamentally sound stocks for short term gains.
Despite FSDH Research analysts reiterating that the stock market has strong growth potential for investors with a medium-to-long-term view, investors still chose to tread carefully in the equity market, particularly because of election considerations.
“We note that most share prices are in oversold positions and these stocks may attract the interest of domestic investors. The Fund Managers’ strategies to position in the market towards year-end may also drive the market up in December”, FSDH Research noted in their most recent equities outlook.
History shows us that the All Share Index (ASI) has averaged a return of 2.8percent in the final month of the year since 1998 – second only to May which has averaged 5.3percent.
In the past 21 years, the market has only seen four negative monthly returns in December (specifically in 2001, 2005, 2008, 2009) – the lowest of any other month. Thus, the probability that there would be a December rally is a whopping 81percent”, United Capital research analysts said earlier in the month.
The forecasts have failed to materialise with bearish sentiment remaining strong as oil prices slide and election uncertainty escalates, leaving stock investors with a miserable Christmas.
Iheanyi Nwachukwu
