As political tension builds up in the country towards the general election in 2019, activities on the Nigerian stocks market have begun to slide as investors lost N607billion in the first two weeks of the month of August. Bearish trading activities has continued to dominate transaction on the market as investors continue to react to the political tension in the country. LEADERSHIP findings showed that the drama that played out during the month with the barricading of the National Assembly complex and an altercation between a legislator and masked secret police officers that went viral further thickened the air of uncertainty over 2019 election. Analysts said with this and other drama series happening in Nigerian politics, the end of the ongoing correction may not just be in sight yet, even as the gale of defection continues across the nation, just before the party’s primaries. According to the analysts, this suggests that the already cautious trading pattern will persist as the just concluded earnings season will not make much difference.
The financials have only revealed the state of these companies as a guide to help investors as they watch market trend and other events happening locally and international. Data on domestic and foreign portfolio investments (FPI) on the Nigerian Stock Exchange (NSE) showed that total transactions rose from N935.26 billion in first half 2017 to N1.597 trillion in first half 2018. There were however more outflows than inflows, with net FPI deficit stood of N38.41 billion, as against the N1.71 billion net positive position in first half 2017. Foreign inflows and outflows stood at N380.65 billion and N419.06 billion respectively in first half 2018 compared with inflows and outflows of N215.97 billion and N214.26 billion respectively in first half 2017. The benchmark, All-Share index (ASI) of the Nigerian Stock Exchange (NSE), for has gone from being the best on Returns on Investment (RoI) in January across the globe, to a year-to-date loss of 8.28 per cent as at August 15, 2018. From August 1 to August 15, 2018, the ASI declined by 5.26 per cent from 37,017.78 points to 35,069.34 points, while market capitalisation shed N607 billion to N12.803 trillion from N13.410 trillion. Analysts noted that the lulls seen in the market is as a results of the upcoming 2019 general election as well as the cautious stand adopted by FPIs, and other domestic portfolio managers over the unfolding political events in the country.
They also noted that the foreign investors are moving their funds into Western countries, especially United States of America, on the heels of rates normalisation in the USA market. Speaking on the stocks market decline, the managing director of HighCap Securities, Mr. David Adonri, explained that insecurity and social disorder are disincentives to investment, saying that “Nigeria is currently experiencing these and it must be tackled with seriousness for investors’ confidence to increase.” According to him, those who control the polity, especially the politicians and the executives, need to be upright and follow due process and perform well, so that the polity will be calm going into the election. They do not need to overheat it. They need not come up with frivolities that will cause conflict and crises, because these are the things that affect the capital market. He suggested law enforcement agencies be more proactive, identify flashpoints and ensure a robust security arrangement is implemented to prevent breakdown of law and order.
The chief research officer of Investdata Consulting Limited, Ambrose Omodion, said investors are currently walking in fear of political risks, believing that violence in the country could trigger panic and massive dumping of shares. He said the development has caused indifference and low investor confidence, saying that foreign investors that play a dominant role have resorted to massive sell-off of shares. He urged investors to review their positions in line with investment goals, strength of the company numbers and act as events unfold in the global and domestic environment, advising investors to go for equities with intrinsic value, especially during this season were second quarter interim dividend payment are expected in the market arena. Also, analysts at United Capital noted that investors are beginning to doubt if there is room for potential upsides going forward, amid political tensions, risk-off sentiment for emerging market assets and a lackluster earnings season. They noted further that so far, 2018 has been filled with more ups than downs; though the domestic macro-economic environment seems stable as Brent prices have stabilized above $70 per barrel, jitters in the political space, rising rates in the developed market and global trade uncertainties, have aided FPIs exit from the Nigerian financial market. They stated that despite, the increased offshore clients sell-off, trading data by the NSE as at June, 2018 showed FPIs having 54.5 per cent control, still dominate activities on the Exchange, outweighing domestic investors with 45.5 per cent as they joined the bandwagon sell-offs. They noted that the recent market setbacks could be an attractive entry opportunity for local investors, believing FPI dominance will continue to guide local investor sentiment. They however said that “given the fact that recent sell-off are not macro-driven, we expect possible return of FPIs after the political environment calms, to spur the market higher.”
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