Despite significant earnings results of banks quoted on the main board of the Nigerian Stock Exchange (NSE), investments in banking stocks posted a N449 billion loss in 2018.
Banking stocks at the end of trading on Monday December 31, 2018 closed at N2.843 trillion as against opening figure of N3.292 trillion at the beginning of trading on January 2, 2018. As a result, the investors lost N449 billion or 13.64 per cent of their stake in the sector.
The market had lost -18.84 per cent during the year in line with the persistent bearish trends, although some analysts said the current trend was not necessarily a true reflection of the fundamentals of the companies but more that of rising uncertainties in the political space. Notwithstanding this development, they are still optimistic that market opportunities remain robust.
Speaking to Daily Sun, Chief Executive Officer, APT Securities, Kurfi Garba, noted that foreign investors exited the market due to the growing uncertainties in the economy, adding that there is need to get the institutional investors and foreign investors back to the market.
“The primary elections of the two parties held in October and so the decline seen in banking stocks was because most of the foreign investors ran away because there was uncertainty. Both parties brought out strong competitors who are really hard to decide who will win at the end of the day and once there is a bit of uncertainty, the market does not do well.
The market wants to see a situation whereby one can be able to predict the likely winner. Looking at the contestants’ antecedents, it will be very difficult to predict one of them will win and so when there is uncertainty, it affects the market because it works with certainty.
For the market to recover, we need get either the institutional investors or foreign investors to come back but we have been seeing exit of the foreign investors and we all know they have much liquidity and when you see them, you see volumes and when you see volumes, definitely you see prices rising high.”, Kurfi said.
Also speaking, National President, Constance Shareholders’ Association of Nigeria, Mallam Shehu Mikail, attributed the loss to the down-turn in the economy as well as non-friendly government policies.
Mikail said, “The economy down-turn, non-friendly government policies and the issues of unstable government interventions were the reason why the banking stocks did not fare well in 2018. things can only pick after the elections, thus investors are awaiting who and who gets to win the elections and so we are looking at the second quarter of this year but for now, the trend will go on as most investors are currently playing safe till the elections come and go.”
In an emailed response to Daily Sun, financial analysts at Cordros Capital said: “We reiterate our negative outlook for the equities market in the short-to-medium term, amidst political concerns surrounding the 2019 elections, and the absence of a positive market trigger.However, positive macroeconomic fundamentals remain supportive of a recovery in the long term.”