Stories by Chinwendu Obienyi
Despite the increase in the number of COVID-19 cases detected in Nigeria in the past two weeks, market operators have said it will not have a huge impact on the performance of the equities market in the near or medium term.
They, however, noted that the nation’s economy is at risk of losing the gains from the hard work of the last nine months and might not experience the much needed recovery expected in the first quarter of 2021.
The Presidential Task Force (PTF) on COVID-19 had announced that there were indications that the country had entered the second wave of infections. The chairperson of the PTF and Secretary to the Government of the Federation (SGF) Boss Mustapha, who gave the indication, said the events and statistics of the last two weeks, within and outside Nigeria, have been very mixed.
“On one hand, the cheering news is that of the COVID-19 vaccine, while on the other hand, we have witnessed spikes in the number of infections at home and abroad. The real threat is upon humanity and the progress made in the global health sector in the last five decades or more.
In Nigeria, the indication is that we have entered a second wave of infections and we stand the risk of not just losing the gains from the hard work of the last nine months but also losing the precious lives of our citizens. We are in a potentially difficult phase of the COVID-19 resurgence. Accessing the hope offered by the arrival of the vaccine is still some time ahead”, he said.
However, the news did not hurt the confidence of investors trading on the floor of the Nigerian Stock Exchange (NSE) as the market rebounded from the previous week’s negative performance with a 7.46 per cent increase in the benchmark index to 36,804.75 points.
In the same vein, investors’ wealth increased by N1.3 trillion as market capitalisation settled at N19.236 trillion while year-to-date (ytd) return improved to 37.1 per cent due to strong interest in the shares of Airtel Africa, Dangote Cement and MTNN. Similarly, all other indices finished higher while the NSE ASeM and NSE Growth Indices closed flat.
Speaking to Daily Sun via a telephone chat, Managing Director, Crane Securities, Mike Eze, explained that the Nigerian equities market being an emerging market will not necessarily react sharply as compared with the reaction of advanced markets.
Eze noted that the fear of another lockdown is not out of place as there will be another lockdown at some point if the COVID-19 cases keep increasing.
“We have seen a surge in market transactions as well as capitalisation owing to the strong participation in the market by both foreign and local investors as well as the low yields in the fixed income market and so with a looming lockdown in mind, foreign investors might decide to retreat and take their profit.
We will observe a form of reduced surge starting from the beginning of the week and this because it is going to be a Christmas week where a lot of the investors will make sales because they will need money to celebrate the Christmas and the New Year season and this will likely bring down the tempo of the market as supply will outweigh the demand in terms of shares’ transactions and not necessarily due to the second wave of COVID-19”, he said.
Also commenting, Head, Research at FSL Securities, Victor Chiazor, said, the market might not experience the impact of the second wave of the pandemic but added that the economy may not recover in the first quarter of 2021 as projected.
“I am not envisaging a full lockdown and I do not see the market suffer on the back of the fact that the vaccine will go round and then most economies will open up. I do not think the impact of this second wave of COVID-19 will be that much and with the position of the market, it will close on a positive note. But my fear is on the economy as I think much of an obstacle will be seen because if economic activities are not in full blast going into the new year and then we might not experience the much talked about recovery in the GDP”, Chiazor said.
Meanwhile, a total turnover of 1.893 billion shares worth N17.647 billion in 20,660 deals were traded by investors, in contrast to a total of 2.265 billion shares valued at N20.990 billion that exchanged hands in the previous week in 23,722 deals.