Nigeria’s stock market was the worst performer, compared with other major African markets, and third worst also, in terms of returns, when compared with other global markets in the first-quarter (Q1) of 2014.
BusinessDay trendwatch shows that in the first three months of the year, apart from Nigeria (-6.2%) and Mauritius (-0.38%), other major African stock markets recorded growth during the quarter. Egypt, despite its political turmoil, grew by 15%, Ghana by 11.2%. Zambia, Kenya and South Africa grew by 9.7% 5.6% and 3.3% respectively.
Beyond African markets, at a negative of 6.2% in terms of returns, Nigeria’s stock market benchmark performance indicator –the All Share Index (ASI) followed China – SHSZ 300 Index which was in negative of 7.9%; while that of Russia – MICEX Index was the worst performing stock market, with a negative return of 9.0%.
BusinessDay comparison of returns in other markets shows that in Q1’ 2014, Kenya – NSE 20 was up by 0.4%; Egypt – EGX 30 rose by 15.1%; South Africa – JSE ASI was up by 3.3%; Malaysia – FBMEMAS Index was down by 0.4%; Indonesia – Jakarta Composite Index was up by 11.6%.
Also, other markets show that Turkey – Borsa Instanbul 100 Index rose by 2.9%; Mongolia – MSE Index remained flat at 0.0%; South Korea – KOSPI index was in negative of 1.3%; Pakistan – KSE Index was in positive of 9.3%; Brazil – BOVESPA Index was in negative of 2.1%; while India – NIFTY Index was up by 6.3%. In addition, the S&P 500 was high at 1.30% while the Dow Jones Industrial Average dropped by 0.70%.
Analysts linked the Nigeria stock market’s 6.2% negative return to sell down by foreign and institutional investors. From a high of about 41,329.19 points in Q4’2013, the NSE ASI dropped to 38,748.01 points as at March 31, 2014. Also, the market capitalisation dropped by 5.89% or N780 billion from N13.226 to N12.446 during the period.
When compared with Q1’2013, the market recorded a positive of 19.4% in returns.
Money managers said they expected the dismal performance while the market recorded intermittent inflows and outflows, as investors evaluated macro-economic concerns over growth opportunities and value.
While reviewing the equities market performance for Q1’14, Tola Odukoya, managing director, Dunn Loren Merrifield Asset Management & Research Company, said “Q1 2014 returns for each sector shows that the entire market would have faired much worse, with a much widened negative return, had Dangote Cement not recorded a positive return in the period.”
On the drivers of the negative market returns in Q1 2014, he observed that oil & gas, food & beverages, personal and household goods, banks, chemical and other financial services, recorded strong double digit negative returns.
“While single-digit positive returns were recorded in Construction & Materials, Real Estate, Industrial Goods & Services and Health Care. Therefore, the double-digit negative returns eroded gains from the single-digit positive returns, resulting in a negative total return for the entire market in Q1 2014,” Odukoya added.
Also, in their review of market performance in Q1’14, equity analysts at CBO Capital, noted that “the effects are bigger than a mere correction, which analysts predicted.” “Outflow of portfolio capital is also largely responsible. Excluding earnings release, investor confidence dropped precipitously, due to market-distorting activities in the polity and external impact, known as the Quantitative Easing (QE) tapering effect.
“ The NSE was bearish in the quarter. This trend persisted despite the release of year-end results by most companies. This could have been because there were no positive earnings surprises,” CBO Capital analysts added.
Investment analysts at Partnership Investment Company plc, attributed the stock market decline to a number of factors.
They noted that “The stoppage of the QE by the US Federal Reserves had resulted in funds outflow from emerging markets, due to improvement in US economic indicators. Also, the liquidity tightening by the Central Bank of Nigeria (CBN), as well as the unceremonious removal of the CBN governor, resulted in uncertainty and the withdrawal of funds by foreign portfolio investors.”
Iheanyi Nwachukwu
