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?
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.