The Nigeria’s stock market would require more than the earnings season to spur a boost in its performance as the market currently underperforms its peers in the Sub-Saharan African market.
Against expectation of a market pick up on the back of a clear political atmosphere, the market has trended downwards back into a negative zone as bears entered into the market.
Year-to-date analysis of the Nigerian Stock Exchange (NSE) All share index (ASI) has shown negative performance as market was down by 1.25 percent as at Tuesday, having descended into negative territory in the past two weeks.
The Johannesburg ASI currently records a year-to-date return of 5.06 percent at an index point of 55,332.89 ZAR against 52,736.86 ZAR as at 31 December 2018.
According to a report by FBNQuest, the Johannesburg Stock Exchange is the most developed and liquid of the three sub-Saharan markets. Also, the market has benefited the most from the signals that the normalization of United States monetary policy has slowed, if not stalled.
Meanwhile on the other hand, the Nairobi Stock Exchange delivered a year-to-date return of 12.06 percent as at the close of trading on Tuesday.
Also in the last one year, the NSE currently stands as the worst performer amongst these markets with a return of -21.23 percent against 2.28 percent return from the JSE and -14.03 percent return from the Nairobi stock market.
According to the NSE’s domestic and foreign portfolio investment report data, foreign investors share of turnover in February at 53 percent but show that their trading over the month amounted to a net outflow of N11bn.
There was a significant increase by 97.80 percent in foreign outflows from N27.81 billion in January to N55.01 billion in February. Meanwhile foreign inflows increased by 91.24 percent from N22.97 billion to N43.93 billion during the same period. This shows an increasing outflow pace compared to inflow by foreign investors.
Daily turnover ytd on the two more ‘frontier’ exchanges has disappointed, averaging US$9.4m in Lagos and US$6.9m in Nairobi.
According to FBNQuest analysts, “The post-election rally was negligible, unlike in March 2015. Many equity investors may have hoped for an Atiku victory on the grounds that his campaign stressed his private-sector credentials and insisted that he would somehow “get things done”. In stark contrast, fixed-income players responded very positively with a surge in buying, as we have previously noted.”
While some external factors capable of triggering sizeable new flows into the Nigerian equity market may seem in favour of Nigeria, analysts insists boosting the domestic economy is a major catalyst for achieving this.
Gbolahan Ologunro, research analyst at CSL securities explained that, “foreign investors are interested in good policy pronouncement from the fiscal authorities and attending to issues that have been long attended to.”
Listing but a few, Ologunro highlighted factors like; Nigeria structural issues in the oil and power sector, issues on unemployment and slow economic growth, debt level sustainability etc.
Meanwhile FBNQuest in its report explained that, “The first would be an oil price at a higher and sustainable level. This is indicated by the well-known linkages between the price and the non-oil economy, which was demonstrated by the healthy GDP growth posted in 2010-14.”
Secondly, they pointed evidence that the banks are achieving the loan book growth of around 10% for the year, which has been their guidance, would be helpful.
On the impact of MTN’s listing in the Nigerian market, analysts have divergent views on whether or not the listing will boost market performance.
“The MTN is a major catalyst to spur performance in the market when brought into limelight,” Ologunro concluded.
David Ibidapo
