Bearish sentiment at the Nigerian stock market continued till the trading week ended Friday August 2, 2019.
Though, the Bourse had kicked-off this new month on a positive (+11percent) note, but the stock market still closed on a negative note in the review trading week.
This record negative comes amid influx of mixed corporate scorecards for the first-half (H1) that attracted insignificant positive reactions from investors.
Following Friday’s record dip of 0.43percent, the Nigerian Stock Exchange (NSE) All Share Index (ASI) decreased by 1.03percent week-on-week (WoW), while year-to-date (YtD), it is down by 12.09percent.
The NSE ASI and equities market capitalisation which opened the review trading week at 27,918.59 points and N13.606trillion respectively closed the week at 27,630.46 points and N13.464trillion. This implies that investors lost over N142billion in just one trading week to August 2.
In the absence of significant market catalysts, the equities market followed some analysts’ earlier expectation of negative close.
The NSE Consumer Goods Index recorded the highest weekly decline of (-5.07percent) while NSE Industrial Index appreciated most (+0.98percent).
Other Indexes on the decliners list include NSE 30 Index with record weekly loss of (-2.17percent), NSE Banking Index (-1.55percent); NSE Insurance Index (-1.58percent); NSE Oil & Gas Index (-1.06percent); and NSE Pension Index (-0.89percent).
Lagos-based United Capital analysts in their August 1 equity market note asked whether they market will continue to ignore fundamentals.
The analysts overall outlook for equities is tepid in the second half (H2) 2019 despite the positive monetary policy stance in the global space.
They imagined the likelihood of a late recovery by fourth quarter (Q4) of 2019 and estimated a -0.1percent year-on-year (y/y) return for equities by end of 2019, capping market uptrend at 31,399.1 points due to the absence of pro-market policy reforms which may continue to constrain momentum despite strong fundamentals.
According to the analysts, “despite the somewhat dovish tone across major central banks in the advanced economies since the beginning of first-half (H1) 2019, FPI flows into equities continued to taper amid increasing interest in short-dated debt securities in Nigeria.” By the National Bureau of Statistics (NBS) reckoning, FPI flows continue to account for the bulk of capital imported into Nigeria even as the net foreign purchases gap on NSE became wider in H1-19.”
“Even though the argument for a rebound is increasingly compelling from a technical standpoint, uncertainties in the domestic policy environment linked to structural vulnerabilities are unlikely to change in the short term. Yet, primary market activities may support the overall performance of the broader index” , United Capital analysts further stated.
“This view is buttressed by the recent announcement by the CBN to recapitalise the banks as well as the size of listings and corporate actions observed in H1-19. Though the proposed recapitalisation exercise in the banking sector is unlikely to have a far-reaching impact, if implemented, we expect this to result in one or two consolidations, with the lower-tier banks as the main target”, they noted .
