Weak short-term outlook for crude oil price; widely expected announcement of rate hike next month by United States Federal Open Market Committee (FOMC); muted growth of Nigeria’s Gross Domestic Product (GDP) at 2.84% in third-quarter (Q3) 2015; investors feeling about Nigeria’s FX risks stocks; and most companies’ foreseen race to disappointing full-year results are major clogs to investors pitching to favour Nigerian equities.
Also, Nigerian equities market which is in free fall suggests that key investors remain skeptical about the strength of the domestic macro-fundamentals.
As at Tuesday, the year-to-Date (Ytd) returns from Nigerian equities market had lowered in excess of minus 19.66 percent, and investors have lost about N1.7trillion.
Latest data from the Nigerian Stock Exchange shows that domestic investors conceded about 6.72% of trading to foreign investors compared to the 11.38% they conceded in the previous month as Domestic transactions increased from 44.31% to 46.64% while FPI transactions decreased from 55.69% to 53.36% over the same period.
Foreign portfolio investors’ inflows accounted for 22.52% of total transactions while the outflows accounted for 30.84% of the total transactions in September 2015.
The Monetary Policy Committee (MPC) met on Monday and Tuesday to review domestic and international economic conditions in order to determine the policy direction for the next two months.
The Committee decision which was in line with analysts’ expectation is as follows: the Monetary Policy Rate (MPR) was reduced from 13 percent to 11 percent; the Cash Reserve Ratio (CRR) was reduced to 20 percent from 25 percent; while the corridor around the MPR was changed from symmetric +/- 200 basis points to asymmetric corridor of +200/-700 basis points.
“With Q3-15 GDP coming in at a disappointing 2.8%, it appears hazy near-term growth prospects is driving a wait-and-see investor approach, with play now tilting more towards the less risky fixed income (FI) market. That said, we see tactical opportunities towards the end of the year and we think equities at current levels is ripe for position taking. We expect the market to close slightly higher this week as investors resume speculative positioning at bargain prices”, according to United Capital analysts in their investment view for this week.
Last week, nineteen (19) equities appreciated in price, lower than twenty-nine (29) equities in the preceding week.
Meanwhile, forty-one (41) equities depreciated in price, higher than thirty-eight (38) equities in the preceding week, while one hundred and thirty (130) equities remained unchanged, compared to one hundred and twenty-three (123) equities recorded in the preceding week.
In value terms, investors in Nigerian listed equities lost circa N245billion last week as bearish sentiment in the market failed to wane while investors refused to take advantage of underpriced stocks.
“As the market continues to trend southwards in the absence of any news flow to sway investors sentiments to the positive horizon, we imagine any gains recorded in the market to be driven by bargain-hunting. Hence we maintain our medium to long term view for investment decisions”, Afrinvest analysts added.
From last week open level of N9.915trillion, the equities market capitalisation dipped further to N9.670trillion. Week-on-Week (wow), the Nigerian Stock Exchange (NSE) All Share Index (ASI) was down from 28,841.67points to 28,131.28 points, indicating a decline of 710.39 points or 2.46percent.
“We expect to see further decline in the equities market as investor confidence in the overall economy remains weak,” said market analysts at Lagos-based Cowry Asset Management Limited.
Also taking a look at the market, Rotimi Peters led team of economic intelligence at Access Bank plc said, “We anticipate that the market indicators will remain less impressive, as the cautious mood by investors persist.”
Iheanyi Nwachukwu
