The weak investor sentiment on the Nigerian Stock Exchange (NSE) remained unchanged in spite of President Muhammadu Buhari’s move to set up an Economic Advisory Council largely dominated by renowned economists.
Year-to-date returns to investors worsened further to -11.9 per cent at the end of trading on Friday after the All Share Index (ASI) which measures the performance of all stocks on the exchange dipped 0.3 per cent.
Last week Monday, Buhari constituted an Economic Advisory Council headed by Doyin Salami, a renowned economist to replace the existing economic management team. The move by the president is towards reviving and restoring faster growth in the economy after a snail-paced growth in the last four years.
Some analysts, however, were of the view that investors were yet to price in the information as concerns abound on whether or not the president would listen and implement recommendations from the council or treat the council as an image-laundering tool.
Reversing a week on week bullish run of 2.3 per cent recorded week prior to last week, the market plunged 0.47 per cent w/w, in market capitalisation.
According to the National Bureau of Statistics (NBS), in the last six years, the equities market has witnessed a deceleration by 22 per cent in capital inflow as investments are rotated into money market instruments which has accelerated at an annual average of 71 per cent as at Q1 2019.
This signals the perceived heightened risk position of Nigeria by foreign investors which has affected the market value of listed firms as prices have crashed to their lows.
To buttress this further, returns of the stock market in dollar term since the global financial crises has been negative with FPI’S investments grossly below prior levels amid strengthening dollars against naira.
The sluggish growth of the Nigerian economy has thrown a large part of its population into a poverty trap while companies seem to be growing, however, this growth is a mirage, Businessday analysis show.
Investors in the stock market would need more than just an announcement of an economic team but market-moving policies, reforms and implementation towards reviving the current precarious state of the Nigerian economy.
“if only the president will listen and implement recommendations proposed by the EAC, then the medium to long term of the equity market is positive,” Paul Uzum, a Lagos state stockbroker told Businessday.
A similar trend was also observed at the fixed income end of the nation’s financial market. The bond market largely recorded positive performance in the week, but that could not be sustained in the last trading session of the week
The bond market commenced Tuesday’s trading session on a bullish note at 14.45 per cent levels, as investors looked to re-invest coupon payments received earlier in the week.
The positive sentiment, however, turned negative towards the close of the trading session as bondholders sold-off outstanding assets following the release of the September 2019 FGN Bond offer circular by the Debt Management Office (DMO).
Consequently, yields rose by 10 basis points on the average across the FGN benchmark bonds to close the trading session, while the T-bills market traded mixed.
On Wednesday, the bond market was bullish on the back of sustained demand interests triggered by inflows from bond coupon payments.
As a result, benchmark bond yields closed the session lower by 3 basis points on the average across the FGN benchmark curve. The T-bills market recorded sell-offs at the long-end of the Nigerian T-bills curve as market participants offloaded positions in anticipation of supply from the T-bills primary market auction
This impacted negatively on instruments as yields expanded by 7 basis points on the average across the T-bills benchmark curve.
The bullish run in the bond market continued until Friday’s session as investors traded in anticipation of the outcome of the Monetary Policy Committee (MPC) meeting held during the week.
The CBN maintained the status quo at the meeting. Consequently, average benchmark bond yields closed lower by 6 basis points, while yields across the benchmark Nigerian T-bills curve compressed by a basis point on the average.
“We anticipate a slight retracement in yields in the coming week, as market participants price in supply coming from the monthly FGN Bond auction scheduled for Wednesday, September 25, 2019,” analysts at Zedcrest Capital Ltd said in a note to clients. “We maintain our cautious outlook for T-bills at current yields as we expect the Central Bank to float multiple OMO auctions to check liquidity levels.”
