Risk-averse investors are approaching the Nigerian bourse to reduce their equity wagers ahead of tomorrow’s announcement by Morgan Stanley Capital International (MSCI) regarding its decision on the Nigerian constituents in its Frontier Markets Index.
While no one is certain about the possible outcome of tomorrow decision, some investment analysts earlier took precautionary steps by advising their clients to reduce their exposure to stocks which make up the Index.
No doubt, any negatives tomorrow from MSCI pronouncement will cause the Nigerian equities market to shed the gains it initially built on over the past weeks.
MSCI had earlier this month issued a statement stating that it was monitoring accessibility of Nigerian equities market –noting that it was consulting its clients on the ease of capital flows in Nigeria.
“It was noted that restrictions on foreign currency trading and deterioration in FX market liquidity, which have adversely impacted capital flows and market accessibility, were the primary reasons for the review of Nigeria’s position within the index. This could potentially see Nigeria reclassified to Standalone Market status,” said research analysts at Meristem Securities Limited.
Aside the significant drag from developments in the crude oil market, the broader market sentiment now appears relatively weak as evidenced in the weak market indicators at the beginning of this week’s trading. This is despite the release of impressive first quarter (Q1) results by some largely capitalised companies.
“While investors remain squarely focused on Q1’16 results that are gradually being release to the market, steady buying in cyclical areas such as banks and other defensive stocks for short-term speculation lifted the Nigerian Bourse last week.
“If investors’ desire to continue to take risk in domestic stocks is sustained this week, the equity market may remain in the green zone”, according to research analysts at Lagos-based Dunn Loren Merrifield.
The NSE All-Share Index and Market Capitalisation appreciated by 0.53% to close last week at 24,850.11 and N8.548 trillion respectively. Similarly, all other Indices finished higher during the review week, with the exception of the NSE Consumer Goods Index, NSE Oil/Gas Index and The NSE Lotus Index that declined by 0.83percent,0.73percent and 0.77percent respectively.
Summary of price changes showed thirty-five (35) equities appreciated in price last week, higher than twenty-six (26) equities in the preceding week. Contrarily, thirty-two (32) equities depreciated in price, lower than forty-one (41) equities in the preceding trading week, while one hundred and twenty-two (122) equities remained unchanged same as in the preceding trading week.
“The equities market returned to winning ways in the past week, recovering from two consecutive weeks of losses. Performance was driven by higher demand, tied to position taking by investors with the Q1-16 earnings numbers firmly in view.
“Barring unexpected shocks on the macro side, we expect demand for equities to be sustained this week, as more Q1-16 numbers roll in. We envisage momentum will however be short lived as investors remain cautious mostly betting for a short horizon”, said market analysts at United Capital plc.
Iheanyi Nwachukwu
