The persisting buy-side lull seen at the Nigerian stock market continues to create doubts on the near-term direction of equities pricing, despite the recent influx of many corporates first-quarter (Q1) financial scorecards.
The Nigeria’s equity market recently stretched its bearish run following record profit-taking in market bellwethers which weighs on overall performance of the Bourse. The benchmark index closed lower by 1.8percent in the trading week to May 3.
Though, the month-to-date (MtD) return in the first week in May closed positive (+0.2percent), the year-to-date (YtD) loss expanded to 7.1percent.
Many equity research analysts on Custom Street had expected the much publicised MTN listing to cheer buy sentiment at the Nigerian Stock Exchange (NSE). Meanwhile, Nigerians eager to buy into the much talked about success of the telecommunications giant MTN via an Initial Public Offering (IPO) would have to wait still further as the application now being considered by the Securities and Exchange Commission (SEC) is for the mere introduction of existing MTN shares held by Nigerians.
The most recent IPO that could have come to the bourse as expected by market analyst was the Jumia IPO but that was lost to a more advanced New York Stock Exchange (NYSE). The narrative on the long awaited MTN Nigeria listing has gradually changed.
“We struggle to identify a trigger to boost the Lagos market. The Q1 2019 reporting season was underwhelming with a few exceptions. Nor has the recovery of the crude oil price helped despite the established linkages between the price and the non-oil economy”, FBNQuest analysts said.
Also corroborating this view, equity research analysts at Vetiva Capital in their May 6 note who expected a mixed trading pattern on Monday and a positive bias as investors look out for bargains on already beaten down stocks, foresee activity levels remaining average “in the absence of any catalyst to alter the trend.”
The stock market is well into the second quarter (Q2) but it is worth noting that most of the stock markets that analysts monitored appreciated in Q1 2019 except the Nigerian Stock Exchange (NSE) All-Share Index (-1.24percent) and Ghana’s GSE Composite Index (-4.58percent).
Amid this record disappointing position at the Nigerian Bourse, Afrinvest Research in their May 6 note still said they “expect to see profit taking activities in some bellwether stocks which could potentially drive negative returns in the NSE ASI.”
“We maintain a cautiously optimistic outlook as investors’ sentiment show signs of improvement”, the Afrinvest analysts added. “Looking ahead, we expect activities in the local bourse to remain tepid in absence of positive triggers that could spur massive buying interest”, Lagos-based analysts at United Capital said in their May 6 note to investors.
They however did not rule out the possibility of intermittent gains in the market “on the backdrop of bargain hunting of stocks with relatively cheap prices”.
The FBNQuest who said that Johannesburg Stock Exchange (JSE) accelerated past both Nairobi and Nigerian Stock Exchanges noted that despite emerging markets seeing a turnaround in foreign portfolio investor (FPI) sentiment, daily turnover on the two frontier exchanges has disappointed, averaging $9.4million in Lagos and $6.2million in Nairobi this year. They believe that sizeable new listings could also energise foreign portfolio investors (FPIs).
“The relief rally on the Lagos exchange after the elections in February and March was negligible, perhaps because the outcome was widely anticipated. “The enthusiasm of two core investor groups remains lukewarm. Domestic equities represented just 6.6percent of the PFAs’ assets under management in January, compared with 9.7percent one year earlier.
“Data from the Lagos exchange tell us that FPIs represented 51percent of turnover in March but that their transactions amounted to a net outflow of N4billion. (An international source estimated the stock of FPI monies in Nigeria in March at US$5bn in equities and $12billion in fixed income),” FBNQuest stated in its May 6 note.
Iheanyi Nwachukwu
