Pressured FX market, general uncertainty in the global/domestic economy, fluctuating crude oil prices, declining corporate earnings and dampening investors’ appetite for stocks are all outcomes of Covid-19 pandemic.
Amid the aforementioned, stockbrokers are expressing their views on the dismals first-half (H1) of 2020 as earlier optimism about economic growth and strong earnings at the start of the year have all but gone.
Olatunde Amolegbe, president, Chartered Institute of Stockbrokers (CIS) said, “The market started the year with the post-election hangover of 2020 but gradually picked-up as Companies started posting their annual results.”
“Unfortunately the rally was curtailed by Covid-19 pandemic that eventually led to a lockdown of activities across board. Interestingly, the two month’s lockdown period witnessed unexpected market recovery as the All Share Index (ASI) which was down about 21percent pre-lockdown gained about 12percent within that 2 months.
“This really is a testimony to the foresight of the Nigerian Stock Exchange and stockbrokers as they have digitized their business in preparation for unforeseen events such as this. So, the market continued to serve the nation even during the lockdown”, Amolegbe noted.
“On the fixed income, yields continued to trend downwards due to excess system liquidity and companies such as Dangote Cement and MTNN took advantage of this to raise cheap capital via Bonds and Commercial Paper issuance despite the pandemic.
The FGN has raised a massively successful 3rd FGN Sukuk Ijarah during the period. Generally, the financial market weathered the storm during this unusual period.
But significant headwind remains on the horizon as we await the Corporate earnings reports for the 2nd quarter”, he stated.
Tajudeen Olayinka, CEO, Wyoming Capital and Partners, said, “I think 8.8percent loss at the end of H1 2020 is still a reasonable figure to celebrate if we must consider what the economy went through in the course of global pandemic, especially the shocks that were transmitted through the market when crude oil prices eventually collapsed in April, 2020”.
“Now that market has had a better understanding of the pandemic, and the fact that everyone has got to live with it, going forward, it is unlikely that market will go through a repeat of the experience we had at the start of the pandemic.
“However, market needs to analyse H1 results that are being awaited, to determine the impact of the pandemic on listed companies, before taking further investment decisions or charting a way forward. More importantly, how the various measures put in place by government would impact the economy as a whole”, Olayinka said.
On a balance of probability, Olayinka notes that “we may see a better market in H2 2020”.
Remi Lasaki, MD/ CEO, Dynamic Portfolio Limited said “Foreign investors are still contending with scarcity of Dollar in their bid to repatriate their money. This is an issue.”
“Government should look at velocity of spending. It has slowed down. There is a need to address the issue of tax again. You don’t tax people who are in dire need of cash flow. People’s ability to spend has been constrained. They are waiting for half year results to see the effects of COVD-19”, Lasaki noted.