The Nigerian Stock Exchange closed on Wednesday, the first trading day after the holiday with a 1.67% pop. The snaps off a three-day losing streak which culminated in a 5% loss at the end of the week ended June 23, 2017. Despite this loss the market is already up 19.5% year to date and looking to close the first half of the year in one of its best return ever.
Last week, we provided an insight into why investors were spooked ushering in the beers towards the tail end of the week. Now that the bulls are back, we are sure you must be wondering what has changed again. The following could explain why;
Rebound in oil prices – Last week, the threat of lower oil prices spooked investors into selling and taking on some profits. They feared a further slide in the price of oil could usher in the bears requiring that they sell and keep back some profits. Oil prices however gained today again after a comeback on Monday and Tuesday when Nigerians were on holiday. Oil prices closed at $47.
Threat of MSCI – The market was also spooked last week after a threat that MSCI could downgrade Nigeria. However, the managers of the index decided to postpone its review till November 2017. The threat if carried out would have meant yanking Nigeria off the front tier market making us a stand alone market. The implication of course would have been that the liquidity that will typically flow to this market will evade Nigeria. Luckily, we live to fight again.
Positive view of results – Rumours making around in the market suggest second quarter results could continue from where it stopped in the first quarter of 2017. If this rumour holds true then taking a bet on stocks now could well be rewarded bountifully in the next coming weeks. Investors who are positive on results are taking positions in time for another bill run. Like we mentioned in an earlier article, the market is currently trading at about 15x 2016 earnings. A positive outlook suggest prices are even cheaper despite the market gaining over 20% already.
Peace in the ND – Last week investors were also spooked by a threat of the New Avengers (looks like an off shoot of the Niger Delta Avengers) that they were going to resume hostilities in the creeks. However, they changed minds in another press release today stating that “have decided to give peace a chance, “to allow their local community leader Edwin Clark, continue negotiations and achieve a peaceful resolution.