Nigerian equities market plunged to a 19-month low, Tuesday, as the All Share Index fell to 30,036.15 points at the close of trading. The decline meant that the benchmark index dipped to its lowest since 31 May, 2017 when it was stood at 29,498.31 points as investors sold on elections worries.
The market, which was battered in 2018 has now lost 33.39 percent since its peak of 45,092.83 points on 19 January, 2018, following continued sell-off in market bellwethers as global and domestic headwinds prove too strong.
The decline was on the back of poor performance in banking stocks – Guaranty (-5.5 percent), UBA (-5.2 percent), and Zenith (-4.7 percent) – which exerted a downward pressure on the benchmark index as it fell 1.20 percent on day-on-day basis and 4.44 percent since trading commenced in 2019.
“The decline in the stock market is expected with the elections fast approaching. Q1 2019 is anticipated to be bearish as investors remain very cautious,” Aluko Paul, an analyst at MBC Securities, told BusinessDay. “We should expect to see the market plunge further in the coming days as political uncertainties remain on the front burner.”
John Holt, which had traded flat since December 24, 2018, jumped 9.09 percent to lead the advancers on the day, closing at 48k per share.
Okomu Oil Palm plc followed closely, gaining 7.93 percent to close at N83.75 per share, while Union Bank Nigeria advanced 3.45 percent to close at N6 per share. Rounding off the top five gainers chart, Lafarge Wapco and Honeywell Flour Mill inched 3.08 percent and 2.70 percent higher, respectively, to close at N11.70 and N1.14 per share.
The laggards were led by NEM Insurance, which depreciated 9.40 percent to close at N2.12 per share, while Northern Nigeria Flour Mills Plc in similar fashion dipped 9.38 percent to close at N4.35 per share. Equity Assurance and Wapic Insurance both lost 9.09 percent as they closed at 20k and 40k, respectively, with Unity Bank closing 9 percent lower at 40k per share.
Across sectors, the performance was bearish as 4 of 5 indices covered closed in the red. The Banking sector lost the most following sell-offs in tier-one lenders Guaranty and UBA, while the Industrial Goods sector gained marginally for the day.
‘’The downtrend is not surprising given the elevated political risk in the political economy,” Gbolahan Ologunro, an analyst at CSL Stockbrokers said.
“In addition, headwind s in the external economy evident in continued normalisation of monetary policy in the U.S and on-going trade dispute between US and China amid oil volatility has continued to raise concern about a weak global economy which has le foreign investors to move their funds to low risk and high quality asset in foreign markets,’’ Ologunro said.
The renewed rally in emerging markets has eluded Nigeria, with the MSCI Emerging market index recently recording its biggest two-day gain in two months.
Analysts say the emerging market optimism will continue to elude Nigerian equities until the political dust settles and global oil prices stabilise.
‘’Globally, emerging markets may experience a better ride in 2019- depending on how the factors affecting their growth play out. For instance, improved trade relations between china and USA will definitely improve the Chinese equities market and then, the possibility of the Feds adopting a dovish stance would be good for EMs,’’ Paul from MBC Securities explained.
‘’For Nigeria, the risk that the elections pose is severe and the Nigerian equities market may not enjoy any of the improvements seen in other emerging markets till after the elections.’’