Investors in the nation’s capital market may have lost the sum of N1.15 trillion from their equities, due to sell off pressure, as returns on equities are becoming less attractive, following the less than impressive performance of most quoted companies in their 6-9 months financials.
Also, foreign investors who accounted for 81.43% of transactions at the stock market in the preceding month of August, may have further reduced their exposure to Nigerian equities in October, following the end of the Quantitative Easing, which is making rates on instruments in developed economies attractive.
Investment analysts also identify uncertainty, related to the coming 2015 general elections, as a possible risk, impacting negatively on stock exchange, that is driving sell-offs at Customs Street.
The Central Bank of Nigeria’s (CBN)’s continued tight monetary policy stance in defense of the naira, further helped to make fixed income instruments more attractive than equities.
BusinessDay analysis of stock market key numbers, shows that the value of listed equities at the Nigerian bourse which had opened in October, at N13.582trillion, dropped to N12.436trillion at the close of deals last Friday, indicating a substantial 8.44% decline in one month.
The Nigerian Stock Exchange (NSE) All Share Index (ASI) which measures the performance of the equities market, was also pounded by sell pressure which watered down investors’ appetite for Nigerian equities. The NSE ASI dropped from 41,135.75 points in the period under review, to 37,550.24 points, at the closing bell for last month’s stock trade.
Equities daily trading volume dropped from a high of 673.97million, as at Thursday October 2, 2014 to 330.763million, at the close of trading on October 31, 2014. Also in the same period, the number of deals fell from a high of 4,894 to 4,564 last Friday.
The NSE 30 Index, which tracks the performance of large cap stocks at the Nigerian bourse, declined to 1,683.72 points last Friday (October 31, 2014) from a high of 1,879.57 points as at October 2, 2014.
Also, in the review one month period, the NSE Banking Index declined from 429 points to 373.92 points; The NSE Insurance Index was also down from 148.15 points to 147.96 points; NSE Consumer Goods Index declined from 1,020.84 points to 920.53 points; while NSE Oil/Gas Index dropped to 416.79 points from a high of 457.75 points.
Unlike in other stock markets which recorded normal spiral trend in performance, many investment analysts believe Nigeria’s heightened political risk continued to cast doubt on her potential as an investment destination.
NSE Lotus Islamic Index, which tracks the performance of 15 stocks on the NSE that are Shari’ah compliant, was also hit by the sell-off after it dropped from a high of 2,696.03 points to 2,462.46 points; NSE Industrial Index declined to 2,550.21 points from 2,734.92 points; while NSE ASeM Index rose marginally from 951.09points to 951.14 points at the end of last month.
“Outlook is cautious, as electioneering and insurgency are expected to slow down investment activities even further,” research analysts at CBO Capital, a Lagos-based advisory firm, noted recently in their economic outlook.
Ahead of last month’s trading activities, analysts at UBA Capital plc, a Lagos-based investment firm, had in their outlook expressed concerns on cautious trading by local investors “on the back of modest expectations around Q3 earnings, even as reduced participation of foreign portfolio investments continue to weigh down market momentum”.
Iheanyi Nwachukwu
