ASI fell below 28,000 points on sustained sell-offs during yesterday’s trading session. The Nigerian Stock Exchange maintained its downward trend as the All Share Index (ASI) fell below the 28,000 psychological mark to settle at 27,864.49 points. The route in the local bourse appeared worse this week as the week-to-date loss in the equities market stood at 2.5% at the close of trading yesterday. Consequently, the Year to Date (YTD) loss widened to 11.3%.

The performance of the stock market since the start of the second quarter (April) has been lethargic. Although, there has been improved FPI flows since then, evidenced by the record activity levels at the Investors & Exporters (I & E) window, the bulk of the inflows have been directed towards money market instruments.

Despite favourable oil prices amidst the dovish theme among major systemic important banks which we believe should make carry trade more attractive, we are of the opinion that the bearish performance in the equities market reflects weak investors’ sentiment particularly from foreign investors, who at this moment appear to be concerned with the legacy structural issues that have stifled economic growth.

According to data obtained from the Nigerian Stock Exchange (NSE), save for the month of April, foreign outflows have outstripped foreign inflows in the five months between January 2019 and May 2019, suggesting that foreign investors have been net sellers of Nigerian equities.

While the Nigerian equities market is currently trading at a steep discount when compared to its peers in Emerging and Frontier markets given the ASI P/E of 6.91x vs. MSCI EM Index and MSCI FM Index P/E ratio of 13.01x and 12.36x respectively, we are not convinced of an imminent rebound in the stock market in the absence of bold policy pronouncements, particularly from the fiscal authorities to address the growth challenge.

[READ: Foreign investors’ inflows outpace outflows as election-fever wears off]

CSL Stockbrokers Limited, Lagos (CSLS) is a wholly-owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.


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