Crude oil price, FX market liquidity to determine stock market direction

The performance of Nigeria’s stock market this week will be largely dependent on events around indicators like global crude oil price movements, news around the Covid-19 pandemic and liquidity in the FX market.

Market watchers’ views continue to favour cautious trading as risks to a sustainable upside movement on the Nigerian Stock Exchange remain.

For instance, crude oil prices closed with a second week of losses, leaving the energy market down by more than 10percent, over the past two weeks. Brent crude, the global international benchmark for oil had closed last week at $39.83.

The record dip in oil price implies a decline in petrodollar income to oil dependent countries like Nigeria with impact on FX liquidity. This causes anxiety among oil dealers and equity investors in listed oil and gas companies.

Amid these concerns, investors are advised to seek trading opportunities in only fundamentally justified stocks.

The local bourse had recorded a mixed trading session last week with significant selloffs at the beginning of the week, and bargain hunting activities in the last two sessions as investors moved to qualify for banks interim dividend.

Though, investors still booked N5billion loss despite that we saw how dip buyers poured into beaten-down banking shares.

The Nigerian Stock Exchange (NSE) All-Share Index (ASI) decreased slightly by 0.05 percent to 25,591.95 points as against week-open high of 25,605.64 points; also the valued of listed stocks on the Bourse decreased to N13.350trillion as against week-open level of N13.358 trillion.

The market has increased by +1.05 percent in this month of September; while its negative return year-to-date (YtD) stands at -4.66 percent.

Week-on-week (WoW), NSE Banking Index decreased most by -2.69 percent, followed by NSE Oil & Gas Index (-1.25percent).

The weekly performances of other sectoral indices show NSE Consumer Goods Index (-0.27percent), NSE Industrial Index (+0.35 percent), and NSE Insurance Index (-0.66percent).