- Profit takings, political tension stir sell pressure
Trading activities on the floor of Nigerian Stock Exchange (NSE) finished the month of May 2018 on the negative trajectory with a record of N1.146 trillion loss to close at N13.802 trillion in market capitalisation.
The drop in market capitalization during the month was due to sustainable profit takings by portfolio investors and speculation on political tension as 2019 general elections near.
The drop in market capitalization during the month was due to sustainable profit takings by investors following gains recorded in December 2017 and January 2018 and speculations about political tension following the recent crisis that rocked the states and local governments’ congresses of the ruling party, the All Progressives Congress (APC). Available statistics to New Telegraph showed that activities on the Nigerian Stock Exchange (NSE), which opened the trading month at N14.948 trillion in market capitalisation and 41.268.01 in index points at the beginning of trading on May 1, 2018, closed the month on May 31, 2018 at N13.802 trillion and 38,606.41 index points, hence has earned a month to date loss of about N1.146 trillion or -7.66 per cent.
Further breakdown of the weekly transactions for the month showed that the market recorded bearish activities throughout the weeks with the last trading week recording the highest losses.
The All-Share Index dropped by 49.29 basis points or 0.12 per cent to close at 41,218.72 index points on May 4 as against 41,268.72 recorded at the close of trading on April 30 while the market capitalisation of equities depreciated by N18 billion. Trading activities during the second week ended May 11, revealed that the All-Share Index increased losses by 196.4 basis points or 0.47 per cent to close at 41.022.31 index points as against 41.218.72 recorded the previous week, while market capitalisation of equities depreciated by N71 billion or 0.47 per cent to close at N14.859 trillion, compared to N164.930 trillion recorded the previous week.
On the third week ended May 18, the All-Share Index shed 549.86 basis points or 1.34 per cent to close at 40,472.45 basis points as against 41.022.31 recorded the previous week while the market capitalisation of equities dropped by N199.billion or 1.34 per cent to close at N14.660 trillion from N14.859 trillion.
The stock market extended weekly losses as the stock market finished at a loss of N416 billion during the fourth week ended May 25.
The stock market finished the remaining four days ended May 31 bearish with a loss of N442 billion in market capitalisation, accounting for the highest loss in the month. The Managing Director, Crane Securities Limited, Mr. Mike Eze, reacting to the development, said the depletion in the price of securities in the Nigerian stock market was as results of profit taking by investors to increase capital gains and speculations and market hearsay on political tension in Nigeria.
Eze noted that the speculation about the political tension in the country will fizzle out very soon as it was just a mere rumour, adding that the effect of the political tension will be more brazen at the turn of 2019.
He noted that portfolio investors, which include some foreign investors and PFAs, have mostly taken position for quick gains which hence they are exiting after an impressive gains recorded in the market between January and February this year.
Eze noted that the current low prices of stocks present investors opportunity to respond to experts’ advice that what they need to do to reposition in the face of losses in the prices of shares were to invest in the market despite losses in the recent time so as to gain at the long run.
He called on domestic investors in the nation’s capital market to leverage on the current low prices of stocks of companies quoted on the floor of the NSE for future gains. Alhaji Rasheed Yussuf, the former president of Association of Stock Broking Houses of Nigeria (ASHON), attributed the persistent lull in the stock market to the exit of portfolio investors due to political situation. Yussuf said that tense situation in the Middle-Belt and political campaigns contributed to the exit of portfolio investors.
He stressed that Nigeria needed foreign investors that were committed to stay on by investing in specific industries. “We need foreign investors, but we need the ones that will come and invest in our economy. “What we are seeing are not the ones that want to invest in our economy, but the ones that want to play our market. Any negative development, they will exit with their money. They are called speculative investors because they don’t want to take any risk.
“They come to your country, but as soon as they see that the foreign exchange is going down or political situation is tensed, they exit. “The speculative segment of the foreign investors is what we are seeing in the market,” Yussuf said.
A stock broker, who spoke on the condition of anonymity, said investors are currently trading with caution because of fear of political risk following recent crisis that rocked the All Progressives Congress (APC) and the belief that any perceived violence in the country may trigger panic and massive dumping of shares. He said the development has spurred apathy and low investors’ confidence in the market as foreign investors that play dominant role have resorted to massive selloff of shares in the market.
“The weak response to earnings surprises is evident in low liquidity in the market, especially as at April-end when Nigeria’s 2018 budget was still facing so much uncertainty, leaving the economy to run entirely on monetary stimulus.”
The broker, however, was optimistic that the sustained low valuation in the market may trigger high demand for stocks as market all over the world is cyclical in nature.
.new telegraph
