Shaking oil price creates new jitters in stock market

Nigeria’s stock market is in for a new but disappointing era following developments in the global oil market.
Oil prices tanked last week by 8 percent to $46.7/bbl – the lowest since June 2017 – as concerns of impact of the coronavirus on demand persisted.

Oil market had shunned the news of a possible additional 1.5mbpd production cut by the OPEC cartel announced after the first day of the meeting last Thursday.

Stocks sold off and Nigeria’s risk premium hit new peaks as investors demanded higher to hold Nigerian assets from local bonds to Eurobonds.

Lagos-based Vetiva Securities analysts expect the market to sustain this negative trading pattern at the beginning of the new week “amid fragile macroeconomic environment as oil prices continued to slide, coupled with the continuous threat pose by the fast spreading Coronavirus across the world”.

Trading activities on the Nigerian equities market closed on a negative note last Friday, as the NSEASI sank by 0.55 percent at the close of the session.

“We expect the market to witness the same sentiment in the next session,” according to FBNQuest analysts in their March 6 note to investors.

Oil prices plunged further by 6.7 percent after investors’ fears were confirmed following Russia’s refusal to support taking on the additional cuts upon conclusion of the meeting at the weekend.

S&P, global ratings agency, downgraded Nigeria’s outlook from a stable outlook to negative, highlighting weak economic growth, sizeable public debt, susceptibility to external pressures and depletion in foreign reserves, among others.

The stock market had gone on a losing streak as investors restructured their portfolio to safe-haven over the possible damaging effect of Coronavirus on company’s performance. Following the outbreak of Coronavirus in Nigeria, some analysts had anticipated a sustained downtrend in the review trading week, despite bargain hunting opportunities.

Amid this fear, the review week witnessed influx of full year (FY) 2019 scorecards of most notable counters in the banking sector. The banking sector is the highest paying sector in terms of dividend.

Ahead of the banks dividend qualification dates, their stocks continued to enjoy investors’ patronage on the Nigerian Bourse, which led to the value of equities listed on the NSE to increase by about N36 billion.

NSE Banking Index, which provides an investable benchmark that captures the performance of the banking sector, increased most by 3.78 percent in the review trading week. NSE Banking Index comprises the most capitalised and liquid companies in banking.

Other sectoral indexes and their performances this week are: NSE 30 Index (+0.12 percent), NSE Consumer Goods Index (-5.87 percent), NSE Industrial Good Index (-4.27 percent), NSE Insurance Index (+1.40 percent), NSE Oil & Gas (+0.80 percent), and NSE Pension (-0.91 percent).

Here are the stocks ARM research analysts recommend for this week: Wapco STRONG BUY (N23.59), Seplat plc – STRONG BUY (N828.90) and Fidelity (N2.92).

The Nigerian Stock Exchange (NSE) All Share Index increased by 0.24 percent from week open low of 26,216.46 points to 26,279.61 points; while the value of listed equities increased by N36 billion to N13.694 trillion, from a low of N13.658 trillion at the beginning of the week.

 

Iheanyi Nwachukwu