The Nigerian Stock Exchange (NSE) recorded a lacklustre performance in February, amidst continued risk-off sentiments and absence of positive market catalysts as its capitalisation declined by N1.2 trillion.
This was as the market’s index fell 2.33 per cent– a massive reversal of January gains when it closed positively with a growth of 7.46 per cent, making it one of the best performing stock markets in the world.
Despite earnings and dividend announcements from quoted companies on the bourse, the All Share Index (ASI) closed the review month at 26,216.46 points from the month open level of 28,843.53 points, while the value of listed stocks decreased to N13.657 trillion from month open high of 14.857 trillion, an indication that investors lost about N1.2 trillion.
According to data obtained from the NSE, the month of February saw all NSE Sectoral Indexes closed the review month in the red. The NSE 30 which tracks the top 30 companies in terms of market capitalisation and liquidity decreased by -9.95 per cent in February; NSE Banking (-15.59 per cent), NSE Consumer Goods (-18 per cent), NSE Industrial Goods (-1.28 per cent), NSE Insurance (-11.89 per cent), NSE Oil & Gas (-6.97 per cent), and NSE Pension (-9.66 per cent).
Overall, a total of 78 listed stocks posted negative returns in the first two months of the year. Oando, Unilever, Nigeria Breweries Plc, Sterling Bank, Wema Bank, and FBNH led the biggest losers with GT Bank also hitting its lowest market value since January 2017.
Market analysts say the loss was attributable to the uncertainty in the Nigerian and global economy following confirmed cases of 55 countries affected by the incidence of Coronavirus even as Nigerian stocks still remain very much vulnerable and directly correlated to foreign investment inflows.
According to a report from CNN, a foreign news agency,” investors are afraid that the spread of the virus across the world could hamper supply chains and trigger a massive slowdown in growth rates”.
Although the United States recorded bit of positivity following the Reserve Bank’s decision to cut interest rates, the same cannot be said of markets accross Europe and Asia. For Nigeria, the story is mixed as Thursday’s session saw consecutive wins for bargain investors who made a profit of over N102 billion. Furthermore, it was expected that with the influx of audited financial reports and dividend pronouncements, the market might see investors taking positions in high dividend yielding stocks.
But with no proven cure and the imminent spread of the virus to other countries, analysts at Lagos-based Vetiva see no deviation from this bearish pattern. They said, “It implies the bearish trend will filter into new month (March 2020) sessions, despite that the market offers opportunity for bargain hunting in some value counter that reached new lows”.
For Managing Director, Decof Investments, Moses Igbrude, investors’ confidence is needed urgently as positive catalyst to spur the market in the green at the end of March.
He said, “The economy is terribly bad, the environment is unstable and we have liquidity issues with quoted companies also having mixed earning releases. Take for example, Total made a loss, 11 Plc (set to delist), and Nigerian Breweries all made losses. The way the banks are declaring dividend tells you that the disposable income of Nigerians are not there. Secondly, investors do not have confidence in the economy as we are yet to deal with issues around border closure, and the Finance Act .
Going forward, we are hoping that the month of March will be different even though we have seen some form of stability in the market, we have seen members of the NSE assenting to the resolutions regarding demutualisation of the Exchange, we hope the macroeconomic environment will favour investors”. But the outlook for the market would be linked to how resilient the oil market would prove to be and the national response in controlling the virus outbreak, said Gbolahan Ologunro, equity analyst at Lagos-based CSL Stockbrokers Ltd.
“Broad market sentiment would still be negative but we are not likely to see a steep decline on Monday if there are no further complications regarding the index virus case,” said Ologunro.