Near N1trn Loss In Three Weeks Signal Persisting NGX Gloom
The pressured sell-offs on the floor of the Nigerian Exchange Limited (NGX), aided a bearish momentum of N999.63 billion loss in the third week of August and pushed the stock market further into the red zone.
This might continue till the end of the year as investors exhibit caution and apathy towards riskier assets like equities, and shift to less risky assets like the bond market, analysts asserted.
The market capitalisation, which represents the aggregate value of all the companies’ shares on the market, widened by 1.96 per cent to N26.63 trillion on Friday, August 19, from N27.16 trillion it opened on Monday, August 1.
For the three weeks consecutive trading sessions in August, investors have traded at losses to the tune of N999.63 billion, as weak sentiments continue to dampen the domestic equities market, even as the All-Share Index (ASI) fell by 1.98 per cent to 49,370.62 basis points, from 50,370.25 basis points in the review period.
A look at sectoral performances, in the review weeks, showed that two indices closed in the negative territory.
The NGX industrial index recorded the deepest fall by 10.39 per cent to 1,847.98 basis points on Friday, August 19, from 2,062.30 basis points on Monday, August 1; the oil and gas index shed 0.65 per cent loss to 552.68 basis points, from 556.28 basis points in the review weeks.
But the consumer goods, insurance and banking indices recorded growth in the review period.
The consumer goods index rose by five per cent to 601.91 basis points, from 573.27 basis points; the insurance index, by 4.14 per cent to 173.95 basis points, from 167.04 basis points; and the banking index, by 2.38 per cent to 387.22 basis points from 378.21 basis points.
A look at individual companies’ performance in the industrial sector showed that negative sentiment printed on the shares of some notable stocks, which largely contributed to the deep fall witnessed on the NGX.
BUA Cement, one of the leading cement manufacturing companies in Nigeria, shed 22.29 per cent to N53.85 on August 19, from N 69.3 on August 1. Cutix followed as the company’s share price fell by 8.26 per cent to N2, from N2.18.
UAC of Nigeria declined by 3.57 per cent to N 10.8, from N11.2; while Dangote Cement dropped by 2.34 per cent to N258.8, from N265 respectively.
On the positive side, Academic Press’ share price rose by 12.43 per cent to N2.08, from N1.85; Red Star Express, by 10.20 per cent to N2.7, from N2.45; and Lafarge Africa, by 2.35 per cent to N23.95, from N23.4.
Unchanged, the share prices of Beta Glass and Julius Berger Nigeria remained at N51.2 and N25.9 respectively in the weeks under review.
As investors exhibit caution and apathy towards risk assets like equities, mixed sentiments may continue to drive trading in the coming weeks.
The National Coordinator of the Progressive Shareholders Association, Boniface Okezie, thinks that the bearish sentiment may continue to trend because of the economic situation in the country.
According to him, the Nigerian economy is in bad shape, coupled with complaints of lack of liquidity in the system, which is no longer handy for many investors.
“I mean cash. Only the politicians have the cash now, waiting for the kickoff of their campaign, then they will start to bring it (the cash) out,” he explained.
As the 2023 general elections draw nearer, Okezie also asserted there is an air of uncertainty in the directions it will go, thus straining gradually the performance of the equities market.
“Will the All Progressives Congress (APC) led government conduct and deliver a free and fair election or will they rig the elections to stay back in office come 2023?
“The fear is affecting the capital market plights. Already there is panic everywhere, you and I know they (the APC government) have not performed well in the last seven and half years,” he said.
Notwithstanding the headwinds, Okezie added that this factor is affecting the market performance despite the fact that companies are doing well.
An Investment and Portfolio Analyst, Abel Ezekiel, noted that up till the end of May, the equities market had really been bullish until the Central Bank of Nigeria (CBN) increased the interest rate from 11.5 per cent to 13 per cent and thereafter to 14 per cent by July. This action of the CBN led to institutional investors moving their investment away from riskier assets such as equities to less risky investment as fixed income (bonds).
“That is what has crept into the market. The appetite for risk assets is waning since the bond market is an alternative,” he said.
He noted also that the increase in the deposit rate by the CBN has also added to the declining interest in the equities market, asserting that the bearish trend in the equities market might continue longer than could be anticipated.
According to him, the negative sentiments in the equities market would rub off on the nine-months financial earnings of quoted companies, and likely on their end-of-year earnings.
He said, “From what we have seen in the past, I can tell you we are not going to witness this within the months, it may be till the end of the year. Forget about the nine month’s result which is the third quarter.
He noted that some notable companies’ share prices as MTN Nigeria Communications, Okomu Oil Palm, Presco and others are dropping, despite the fact that their financial results were impressive.
“inflationary pressure is not only having an impact on institutional investors but also on the income of individual households, which barely survived with it not to talk of investing.”
“The pressure on consumer goods and services, household income is not leaving them with the option of having anything to invest, safe for some few people that have enough and could invest. So, no matter the results that some of the companies may turn out, I can tell you the market may not rebound.
“Only in some special cases. For instance, when information came that Seplat wanted to buy ExxonMobil, their share prices went up. That could be a factor that could drive the shares of that particular company,” Ezekiel added.
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