The ongoing slump in Nigerian stocks since 2014 may persist until at least the benchmark index hits the 20,000 points mark, according to analysis of long-term price averages or charts.
The benchmark NSE all share index (NSEASI) fell 16.39 percent in 2014, 17.35 percent in 2015 and is already down more than 15 percent in the first 10 trading days of 2016.
Five year charts of the index shows the 20,000 points mark as the next significant support level that could attract interest from buyers.
The index is currently trading at the 23,441 points mark down from 28,642 points at the beginning of the year.
“Stocks will have to drop another c.15 percent to reach the next psychological support level of 20, 000,” Abiodun Keripe of the Research and Strategy department at Elixir Investment Partners Limited said in response to questions.
“Given the influx of negative macro data/news both global and domestically, this is pretty much possible even within a very short-time frame. Note that in just two weeks into 2016 equities are down 17.39%.”
About N1.7 trillion has been shaved from Nigerian stock values since the beginning of 2016, which has been selling off amid broader global growth concerns and oil price slump to below $30 dollars.
Across Emerging-markets stocks fell on Friday to the lowest level since 2009, capping a third straight weekly loss, as Chinese equities fell into a bear market and oil’s slide below $30 a barrel weighed on assets of energy producers.
The Shanghai Composite Index decreased more than 20 percent from its December high amid concern over Yuan price swings and a report that some banks have stopped accepting the shares of smaller listed companies as collateral.
“The current sell-off especially by foreign investors is a reaction of global portfolio managers to perceived emerging market vulnerabilities given the developments in the Chinese economy, which is the benchmark for Emerging Market Economies (EMEs). However, when this accelerated drop in the market is put in recent historical perspective, it adds another variable to the equation as it begs a question – Is another tacit devaluation in the offing?” Meristem Securities analysts said in a report released Friday.
“In less than 10 trading days the market is 1,639.8pts away from replicating the total points lost in 2015.”
The NSEASI last touched the 20,000 points level in early March 2012.
The index has fallen nearly 15, 000 points since November 2014, when the 50-day moving average crossed below the 200-day moving average.
The bearish technical pattern is often referred to as a “death-cross”.
Many technicians see the death cross as marking the spot that a shorter-term pullback morphs into a longer-term downtrend.
Nigerian currency and stock markets have been hard hit by the persistent fall in crude, Nigeria’s main export, triggering a fall in government revenues and exit of foreign investors from the local bourse.
Brent crude, which gives Nigeria around 95 percent of its foreign earnings, fell to $30 a barrel for the first time in twelve years on Tuesday.
The central bank on last week stopped the sale of dollars to retail foreign exchange operators saying they were using up the country’s foreign reserves for illegal transactions and selling the dollar above the bank’s official rate of 197 naira.
On Wednesday, bureaux de change traders were quoting to sell dollars at a record low of between 290 to 300 naira citing thin liquidity.
PATRICK ATUANYA
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