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As we enter into the last quarter of the year, an equity report by EUA Intelligence, a Lagos based investment advisory firm, showed that in the past decade, the Nigerian All Share Index has declined in 7 of the last 10 years, sending jitters through the spine of investors.
Investors who have already seen the stock market decline by 14.14 percent year to date were hoping to enjoy a Q4 stock or Santa rally but the report by EUA Intelligence shows that investors should put little faith in the expectation of any market rally in the last three months of the year.
Since the market meltdown in 2008, the stock market has declined 70 percent of the time in Q4 increasing the likelihood that investors may see something similar this year with the market trend already titling downwards.
Analysts say sell pressure from investors who are looking to liquidate some of their investments to enjoy the holiday season may be what to blame for this trend.
In the past decade, the only years when the stock market rallied in Q4 were in 2012, 2013 and 2017. All were years when the stock market was already trending higher during the year at double digit growth in the first 9 months of the year. In the first 9 months of 2012, the stock market rallied about 25 percent before enjoying another 6 percent gain in the last 3 months of the year.
Read also; Stock market to still wander within negative territory
In 2013, the stock market had already rallied about 15 percent in the first 9 months of the year before the market gained another 10 percent in the final quarter of the year. In 2017 as well, the stock market had gained as much as 36 percent in the first 9 months before adding another 4 percent gain in the last quarter of the year, according to the report by EUA.
The worst Q4 stock market performance during the period was recorded in 2014, after rapidly declining crude oil prices led to a deep selloff in the final quarter of the year. With crude oil prices declining by around 20 percent over the past 2 weeks, investors are now wondering if Q4 2019 could be a repeat performance of Q4 2014.
“I think we will have to wait and see how the market performs in the final quarter this year. We expect corporate earnings to be better than they were last year but the economic fundamentals in the country continues to deteriorate which is a major concern for investors. Lower crude oil prices and the stagnant inflation will definitely be on the minds of the investors who will be trading very cautiously in this period. There is perhaps a higher chance of a decline than a rally in Q4 as we can see that is what history and our current economic situation is pointing to,” Obinna Uzoma, chief economist at EUA Intelligence told BusinessDay during a telephone chat.
