- Stock Market Remains Bearish
The stock market remained bearish in the first week of 2019 as investors continued to adopt cautious trading following persistent political jitters ahead of general elections next month.
The market, which recovered in 2017 after two years of decline to grow by 42.3 per cent, depreciated by 17.8 per cent in 2018.
Analysts attributed the negative performance of the market in 2018 to rising yields in the United States(US) due to hike in interest rates and the political uncertainties in the domestic economy in the build up to the 2019 elections amidst a sluggish growth in gross domestic product (GDP).
Given the fact that some of the factors still exist, the local bourse maintained a bearish trend last week with the Nigerian Stock Exchange (NSE) All-Share Index (ASI), shedding 1.28 per cent to close at 30,638.90. However, market capitalisation appreciated by 0.78 per cent to be at N11.426 trillion due to listing of additional shares of Cement Company of Northern Nigeria Plc.
All other indices finished lower with the exception of the NSE Oil and Gas Index that rose by 2.91 per cent. The NSE Industrial Index led decliners with 3.9 per cent, followed closely by the NSE Banking Index with 2.7 per cent. The NSE Consumer Goods Index and NSE Insurance Index went down by 1.0 per cent apiece.
Commenting on the market performance, analysts at Cordros Capital said: Our view continues to favour cautious trading in the equities market amidst brewing political jitters ahead 2019 elections, and the absence of a positive market trigger. However, we expect positive macroeconomic fundamentals to drive recovery in the long term.”
The equities market may suffer more decline in the days to come as there is no indication of the return of foreign investors soon. Besides, local investors are still watching the polity and not willing to stake their money now until after the general elections.
The Acting Director General of the Securities and Exchange Commission (SEC) Ms. Mary Uduk had said a large percentage of investors in our market are foreign investors and their exit continued to impact negatively on the market.
“We can see that the impact of increase in interest rate in advanced countries not just US, has impact on capital outflow thereby leading to reduced performance in our markets. I want to say that the interest rate increase in advanced economies not just the US, does not affect only Nigeria but also affects other emerging and frontiers market in the world,” she said.
Also, analysts at CSL Stockbrokers said while prices of equities have depreciated significantly, it may be too early for investors to take advantage of the low prices.
They said: “Although, we acknowledge that the broad sell off in the market has led to a significant moderation in the share prices of stocks providing opportunities for bargain hunting, we think that the argument for “Buying the dip” frequently advanced by money managers and traders is still too early to call for.
“With growing concerns about a weakening global economy, the U.S Fed providing guidance for two rate hikes in 2019 and more importantly, the elevated political risk in the domestic economy, we expect foreign investors to remain on the sidelines. Hence, we still expect a choppy theme to characterize the nation’s bourse over the short term.”