• Thursday, March 28, 2024
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BusinessDay

Nigerian investors worse-off as equity market moves inversely against peers

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While other emerging markets have returned positively to respective investors of their exchanges, investors in the Nigerian equity market have seen their value erode aggregately by 7 percent since the start of 2019.

The Nigerian bourse seems to be only notable exchange in emerging market space with negative year-to-date return, even as it underperformed average EM & FM markets with 9.32 percent and 6.98 percent respectively.

Analysis revealed that while the Nigerian equity market seem to lack adequate boost in terms of clear policy direction, despite impressive results by companies during current earnings season, spread with other emerging markets have widened consistently making the market the worst performer amongst others.

Emerging markets like China, Kenya, Egypt and South Africa have returned 17.34 percent, 12.36 percent, 10.39 percent and 10.06 percent respectively to investors, all outperforming the emerging and frontier markets averages.

For the Nigerian investors, value worth a whooping N785 billion ($2.56 million) have been eroded during the period under review as market value of all shares on the exchange closed at N10.935 trillion on Tuesday against N11.720 trillion as at 31 December 2018.

“Foreign investors who are the major movers of the market aren’t certain of the policy direction of the current administration, hence current earnings season isn’t sufficient enough to boost the market,” Paul Uzum, Lagos based stock broker on the NSE told BusinessDay.

“Judging from the reaction of the market during and after the election, it is clear that only a market moving policy can boost the performance of the market, if not we may see market struggle even to the third quarter of the year,” he added.

A review of the behaviour in emerging markets performances revealed that the spread between the Nigeria market and peers began widening mid-February as investors anticipated the 2019 general elections. Afterwards, the spread kept widening as investors sentiments soured.

This is however against analysts’ expectation of a post-election market rally, especially the Economic Intelligence Unit (EIU) who predicted a rally on the back of a victory by PDP.

“One could easily say the economic situation of the country have deterred investors from Nigeria, but if we look at South Africa, our realities are not far apart however, their exchange is doing better,” Yinka Ademuwagun, research analyst at United Capital.

Ademuwagun submitted that foreign investors are pricing the current silence of Buhari on his muteness regarding the next Central Bank of Governor, which to him creates some level of uncertainty for investment.

Though the Lagos market has not returned positve gains to investors unlike peers, its stocks are one of the cheapest in the EM space, trading at multiple of 7.14 times thier earnings, compared with South Africa (17.75x), Egypt (15.29x), China (14.15x) and Kenya (10.30x).

“Equity is attractive at the moment. All it is needs is a positive trigger”, Ademuwagun maintained.

 

David Ibidapo & Israel Odubola