Nigeria’s Equity Market Inching To Crash With N625bn Loss In One Week
By CHUKWUMA KELECHUKWU
Equity investors at the Nigerian Stock Exchange (NSE) lost N652 billion in one week of bear grip, thus extending three straight months of losses that crashed all performance indices of the challenged market.
From a high of 42, 748.43 basis points as of February 2018 (with market cap at N15.340trillion), the All Share Index crashed to 27, 919.50 basis points on Friday July 19, 2019 (with market cap at N13.606trillion), a level last seen about three years ago in May 2017 when market cap stood at N9.577trillion.
Investors offloading blue chip stocks to reduce losses caused equity capitalisation to depreciate to N13.606trillion after the market valuation indicator had risen to N14.258trillion on July 10 following recent listings of the shares of MTN Nigeria, Airtel Africa and SAHCO Plc.
The three significant listings brought additional N3.25trillion value to NSE equity capitalization which opened on January at N11, 720trillion while the index stood at 31, 430.50 basis points.
If the additional N3.25trillion is taken off the valuation, the market could have depreciated below N9trillion, implying that the market is as good as crashed from over N11.7trillion as of January 3, 2019 before the new listings.
While the listing of 20.35 billion ordinary shares of MTN at N90 per unit added N1.83trillion to market capitalisation, the listing of Airtel Africa’s 3.758 billion ordinary shares at N363 per unit brought additional N1.36trillion to equity capitalisation. Earlier in May, the listing of 1.353 billion ordinary shares of SAHCO Plc had boosted NSE market capitalisation by N6.29billion.
Between January and July this year, the market maintained steady losing streak culminating in 11.2 percent year-to-date (YTD) losses after a month-to-date decline of 6.8 percent on Friday, the worst performance since after well known market crash in 2018.
In other words, market situation worsened significantly in the last one month, dropping by 6.8 percent to record 11.2 percentage decline in six months.
Equity investment analyst told InsideBusiness that when in a bear market percentage decline in the index and prices across board average double digit in less than six months, the market is as good as crashed.
He said “Market crash is a sudden, dramatic, double digit percentage decline in stock market index and prices across board over a period of time due to economic circumstances occasioning crowd behavior where large number of market participants are sell off shares if only to reduce losses.
“It can be distinguished from bear markets by panic selling and abrupt, dramatic price declines. Theses tendencies are already inherent in our market over the last three months and the outlook is getting any better, said the analyst.
The analyst who did not want to be mentioned listed factors that herald market crash, all of which he said are significantly being experienced in the market currently, warning that if nothing is done urgently too, the market might sink.
In the week ended today, Friday July 19, 2019, investors lost N315.5bn in stocks value as market capitalisation decreased to N13.606trillion from over N13.9trillion opening level at the beginning of trading on Monday.
To reduce losses, investors selling off shares of FBNH (122.9m units), GUARANTY(105.8m units) and UBA (78.3m units) prompted 9.8 percent increase in average volume to 273.9m units while average value traded fell 3.2 percent to N2.8bn. The top traded stocks by value were GUARANTY (N3.1bn), DANGCEM (N1.0bn) and ZENITH (N992.7m).
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