Capital market investors have lost about N2.15 trillion in 13 days of 2016 to the prevailing currency volatility, and uncertainty in global crude oil prices that have driven profit-taking Northward in the equities market.
As at Tuesday, the market capitalisation of the Nigerian Stock Exchange (NSE), stood at N7.7 trillion down from the N9.850 trillion recorded at the close of trading on December 31, 2015, representing 22 per cent.
With the increasing flight of investors profit-taking, the management of NSE might be forced to introduce the circuit breakers rule.
The Chief Executive Officer, NSE, Oscar Onyema, Onyema had explained that the performances of the market indices are reflections of scenarios in the global economy.
Onyema at the recent NSE 2015 Market Recap and Outlook for 2016 event held in Lagos said, “Among emerging markets, recession has materialised in Brazil and Russia, and the trend is likely to continue amid weakening oil and other commodity prices.
“In Sub-Saharan Africa, while the recent performance of Nigeria and South Africa has been lacklustre, the overall region has weathered the commodity slump better than Latin America and elsewhere, with growth slated at 4.3 per cent in 2016, up from 3.8 per cent in 2015.
“This growth is expected to be supported by the moderate recovery in the global economy and growth in low-income developing countries, which compared to 2015, are projected to grow by one more percentage point to 5.8 per cent in 2016.”
He said uncertainty and volatility dominated the forecast for this year and beyond as Nigeria struggles with commodity price shocks and the resultant impact on the naira.
With circuit breaker being anticipated,the Exchange has the power to halt trading activities for 30 minutes in the event of a sharp drop (up to five per cent) in the value of the All Share Index (ASI) from the previous day’s close between 10:15 a.m. and 1:45 p.m.
Also, The Exchange shall not halt trading if a Significant Market move occurs after 13.45 p.m. The Exchange shall halt and reopen trading based on a Significant Market move only once per trading day.
Financial analysts believe that some of these factors sent shock waves to both local and foreign investors and created uncertainty in the investment environment, which led to a retreat on the part of bargain hunters.
Investors have continued to sell-off stocks as capital market, equities segment fell N40 billion on Tuesday to near a three-and-half-year low after reports that naira hit a new trough of N305 to a dollar at the parallel market, weighed down by sliding oil prices and the Central Bank of Nigeria (CBN) decision to curb dollar supply to Bureau de Change (BDC) operators.
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