There was no respite to the bearish sentiment bedeviling the performance of stocks listed on the Nigerian Stock Exchange (NSE) as investors continued sell off their holdings on the back of high risks to take advantage of opportunities in the fixed income segment of the Nigerian capital market.
Unlike the stock market where a portion of a company is bought with hopes that the firm would grow and deliver returns for investors, debt securities, such as bonds and treasury bills are traded in the fixed income market and offer little or no risks. The government and corporate organisations borrow from investors with guaranty of an interest payment.
However, stocks trading on the NSE delivered no return for investors since the start of the year, rather investors who bought parts of the publicly-owned companies when the year began are now counting their losses as investors’ wealth has so far been slashed by 14.7 percent to N13.1 trillion. This compares with frontier market peers which have gained 3.9 percent from the beginning of this year.
The worth of all stocks on the Nigerian bourse, measured by the NSE All-Share Index (ASI), depreciated for six straight trading days after the close of business on Tuesday, while the Nigerian treasury bills and government bonds continued to record positive performance.
The losses recorded in the market were triggered by depreciation MTN Nigeria and Dangote Cement, the two most valuable companies on NSE, as well as United bank for Africa (UBA).
Although, market participation improved in the stock market as the total volume and value of trades advanced by 22.56 percent and 68.63 percent respectively, that was not enough to improve the market value of 14 stocks that fell at the trading session.
However, the strong participation of investors in the treasury bills and bond market translated to a positive performance in the markets. Buy pressures were witnessed across all Tbills maturities and the long-dated maturities of the Nigerian government bonds.
On the average, the total return investors expected to get on Nigerian treasury bills was 12.94 percent as of Monday. However, due to increased demand for the securities on Tuesday on the back higher volume of money recorded in the market, prices of the assets surged, leaving average return investors can expect at lower rate of 12.21 percent.
A similar trend was observed in the bond market as average return for investors who were willing to hold their assets until maturity date weakened to 14.39 percent.
Analysts at Afrinvest Securities Limited said they expect the negative performance in the market to persist as investors gravitate toward lower-risk investments as they continue to perceive the relatively high risk in the stock market.
OLUWASEGUN OLAKOYENIKAN
