• Sunday, February 25, 2024
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A bloody H1 tests nerves of value investors 

A bloody H1 tests nerves of value investors 

The first half of the year 2019 has seen significant erosion in the value of investors’ holdings, largely on the back of negative sentiment inherent in the market, as investors perceive retroactive measures from fiscal policy makers.

As at the end of trading on Friday, the Nigerian all share index (ASI) moved closer to its 1 year lowest point after market dipped further by 0.31 percent, after a significant decline by 1.9 percent the previous trading day.

Analysis of year to date performance of Nigeria’s ASI shows that investors’ on the nation’s bourse have shed -8.93 percent in total market value.

Nigeria market bellwethers have also taken a hit losing a whooping N620 billion in market value as of the last day of trading on Friday, each close to their 1-year low on the back of sell-offs.

While prices of these stocks may appear cheap now, analysts envisage that investors who intend to invest short may get their fingers burnt as necessary impetus to market is not visible.

To this end longer term investors are in the best position to take advantage of lowest prices of value stocks with strong and promising fundamentals.

Proven by analysis by BusinessDay analyst, the Nigerian equity market has historically followed a pattern where shorter term (1-2 years) investors become worst off while longer term (3-4 years) investors become better off. Also, analysis further revealed that gains of investors begin to reverse when held for the 5th year which most times falls within the general elections.

While the introduction of MTN provided what we could term as an “artificial boost” for the stock market which saw overall market capitalization rise by N2.9 trillion to N13.6 trillion in 5 trading days, MTN stock price have reversed, closing at N129.65 from N99 listing price.

“MTN is still at its price discovery stage, hence we can’t say for sure whether current price is its intrinsic value,” Gbolahan Ologunro told BusinessDay.

In contrast to Airtel Africa dual listing on the London stock exchange and Nigeria stock exchange market, analyst have raised concerns over company’s fundamentals ranging from high balance sheet leverage and stock being pricey.

This was evident on the LSE as stock traded lower against its listing price of 80 pence on the first trading day. Also while stock gained 10 percent upon listing on the NSE, gains reversed 10 percent consecutively in two trading sessions, closing at N323.50 on Thursday.

“The stock market will continue to sustain its bearish trend in for the remaining part of the year on the back of sluggish fiscal stance and exposure of the economy to external shocks despite the coming earnings season may provide some respite to some stocks like the banking stock,” Gbolahan Ologunro, equity analyst told BusinessDay.