In July, Low Prices Boost Stock Market By N113bn
The stock market recorded a positive performance in July as investors gained N113 billion, compared with a decline of N399 billion in June.
The market capitalisation, which measures the value of all equities, rose from N12.766 trillion to N12.882 trillion, indicating a growth of 0.8 per cent, while the Nigerian Stock Exchange (NSE) All-Share Index rose by the same margin from 24,479.22 to 24,693.73.
The market, which recorded a decline of over 20 per cent in the first quarter, recovered in the first and second months of the second quarter as investors cashed in on low prices of stocks. But profit-taking led to a decline in June.
However, the market ended July, which is the beginning of the second half of the year, with a growth of 0.8 per cent.
Market operators linked the positive performance to bargaining hunting and positioning ahead of corporate results for the half-year ended June 30.
While some investors were trading cautiously waiting for the corporate results, some were taking advantage of the low prices to enter the market, hence the gain recorded in the month under review.
Although the market has recorded a growth in July, analysts at Cordros Securities Limited, said their view continued to favour cautious trading as risks remained on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions.
“Thus, we continue to advise investors to seek trading opportunities in only fundamentally justified stocks,” they said.
Some market operators had said one of the factors that would determine the market direction for the second half (H2) of 2020 would be corporate results for six months to June 30.
In their assessment, analysts at Afrinvest (West Africa) said the first half (HI) of the year cautioned against an overly optimistic outlook for the second half.
“We envisage that the recovery pattern in late H1:2020 would be sustained due to an improvement in risk appetite mostly from the locals and an improvement in external conditions. That said, we note that the downside risks to our expectation include tightening of the partial economic reopening due to new wave of the COVID-19 spread, lower oil prices, MSCI’s classification of the Nigerian market as a standalone, continued FX illiquidity and weaker than anticipated economic and earnings growth,” they added.
Before now, operators had advised discerning investors to take advantage of the current low prices and increase their investments in the market.
For instance, a stockbroker, Mr. Ayo Oguntayo, said: “Just like the scenario that occurred after the decline in Q1 when investors swooped on shares due to their low prices, the decline in June has provided an opportunity for discerning investors to come in ahead of the release of H1 financial performance of companies.
“Although there are some apprehension that the COVID-19 pandemic may have an impact on the results, there are possibilities of some companies still coming up with positive results because many of them activated their business continuity plan that helped to mitigate the negative impact of the lockdown,” Oguntayo said.
Also speaking, the Chief Executive Officer of Wyoming Capital and Partners, Mr. Tajudeen Olayinka, said now that stakeholders have 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 it had at the start of the pandemic.
“However, the 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 the government would impact the economy as a whole. On a balance of probability, we may see a better market in H2 2020,” Olayinka said.
Besides, market operators said H2 would also be affected positively by the words of assurance of the Director-General of the Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, that investments in the market would be protected.
“We want to assure investors that this market is for them and we are ready to do everything to ensure that we increase investor enlightenment through education, robust regulation and fair dealing. For those that want to defraud investors, there would be no respite because we are ready to fight market manipulation to the last, anyone that flouts our rules will be made to face the consequences of their actions,” Yuguda had said.