The month of October is typically a happy month for Nigeria due to celebration of the national Independence Day but for equity investors, October has hardly been a memorable month in recent years. Over the last five years, the Nigerian Stock Exchange All Share Index has declined in every single year (excluding 2017 where the stock market returned 3 percent) in the month of October.
A review of the stock market performance over the past 5 years revealed that in 2014, the ASI declined by -10% in the month of October and declined further by -7% the following year. During the year of recession in 2016, the stock market declined by -4% in October as the market continued a gradual improvement on performance although remaining negative through the 3 consecutive years. In 2017, the stock market returned 3%, marking its first positive October in 4 years. In 2013, the stock market also returned 3%.
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Investors are very concerned about how the stock market will perform in October as trillions of naira have already been lost in the stock market this year. As at market close on Friday, year to date return on the stock market was -15.58% while month to date the stock market had already declined 3.8%, ultimately moving in the direction it has 80% of the time in the last 5 years.
“Some trends seem to repeat rather too often in the market. We have seen over the years that October is an unprofitable month in the market and we can assume that it stems from the fact that not many companies pay interim dividend during this period,” said Tochukwu Okafor, a finance lecturer at Covenant University.
Some economists have pointed to the weakening economic fundamental as the reason to why they expect the decline in stock performance to continue in October.
“Honestly overall economic fundamentals don’t support improvement in the stock market this month as declining economic growth accompanied by rising government budget deficits continue to put significant strain on consumer and investors pockets. While it is still possible for the stock market to end the month on a positive note, the most likely outcome is for the markets to continue to decline as we see company profitability take a strong hit in the last 2 quarters, ” said Obinna Uzoma, chief economist at EUA Intelligence.
Investors will be watching the stock market very closely to see if they end the month in the red or in green over the next 2 weeks.
Slowdown in the global economy and increasing oil supply from non-OPEC countries remain headwinds to oil prices and external accounts.
