What history tells us about stock performance in September

The Nigerian Stock Market continued its loss-making streak in August closing the first working day in September with a loss of 0.03%. It could have been much worse as stocks traded lower during intra-day trading before the bulls appeared to help reduce the losses.

The stock market ended the month of August with one of its worst routs in the year closing at a loss of 5.86%, the second highest this year after it posted a loss of 7.67% in May 2018. A flashback into history could perhaps have prepared investors for what is typically a disastrous month in any year for stocks.

As the data above depicts, Nigerian stocks have lost every August in since 2007 except for 2012 when it posted a gain of 2.9%. August is the month of the devil for stocks and it did not disappoint again this year. If August is typically bad, what does history tell us about September?

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According to the same data, September is usually a better month than August and has closed positively than negatively over a 10 year period. Are there indications that September 2018 could have a positive close? We doubt it and remain optimistically cautious at this point.

Here are the reasons;

• Nigeria’s external reserves dipped below $46 billion suggesting that the CBN is now spending in dollar war chest defending the exchange rate.
• The larger implication is that foreign investors are exporting more capital than they are importing into the country. The capital market typically bears the brunch.
• With foreign portfolio investment dwindling, local portfolio investment will follow suit sucking out demand in the market.
• Stocks haven’t bottomed out yet, at least going by 2016/2017 (first quarter) benchmarks when the All Share Index was trading under 30k points and around N9 trillion in market cap.
• Stocks currently have a market capitalization of N12.7 trillion having lost about N687 billion in August alone.
• Between April 2017 and May 2018 stocks gained a whopping N6.6 trillion. It has lost N2.8 trillion since then. There could thus be more room for losses as investors still have some value on the table.
• The uncertainty around who will contest against President Buhari is also a major concern. Politicians are scaring the market.
• Latest accusations of illegal repatriation of funds by MTN is also likely to have a negative impact on further investments into the country.