Connect with us
Stanbic IBTC
Polaris bank
Fidelity ads

Market Views

Nigerian Stocks snap 7-year losing streak to post first gain in August

NSEASI advanced 2.5% in August outperforming the 0.9% gain in July and the 3.1% loss in June.



Nigerian Stocks snap 7-year losing streak to post first gain in August

Equities trading in August welcomed the release of Nigeria’s Q2 2020 GDP data, which captured the full impact of the lockdown on economic activities induced by the pandemic.  

The economy contracted by 6.1% y/y from 1.9% y/y in Q1 2020, making it the worst performance on record, according to the National Bureau of Statistics’ report.  

READ: Sterling Bank’s earnings to remain pressured but valuations still attractive

That said, the stock market was relatively calm for most of the month and appeared decoupled from the rest of the economy. Despite the calmness, the NSEASI (up 4.6% QTD), advanced 2.5% in August outperforming the 0.9% gain in July and the 3.1% loss in June.  

In terms of activity, while the average daily volume increased by a whopping 15.7% to 224.5 million shares, transaction value rose at a slower pace of 1.3% relative to July level.  

The absence of foreign players further stoked silence in the market as Foreign Portfolio Investment (FPI) moderated by 91.1% y/y and q/q to $385.3m in Q2 2020, the lowest since Q1 2017. FPI flowed into the equities moderated by 89.3% y/y and 91.7% q/q to $53.3m.  

READ: Access Bank posts Profit Before Tax of N74.31 billion in H1 2020

We attribute the weakness in FPI flows to the nation’s currency crisis, with over $2.0 billion of foreign investor funds searching for an exit.  

Furthermore, the extended delay in the submission of H1 2020 earnings from bellwether companies, particularly in the banking sector, hampered investment decision making for the local investors. 

We are optimistic that the mid-to-long-term outlook for equities is positive, as economies across the world continue to reopen for business and the CBN can rein in the chaos at the FX market.

READ: World Bank predicts Nigeria’s impending recession will be worst in 40 years

Nigerian equities are relatively still undervalued at 9.0x P/E ratio compared with Egypt at 11.5x, South Africa at 19.2x, and the BRICS markets at 17.4x.  

This presents an attractive investment opportunity for long-term investors across selected sectors, which we believe are better placed, despite the fear of a looming recession by the end of Q3 2020.  

bitcoin train

As at the end of the first trading week in September, all the outstanding tier-1 banks have published their H1 2020 numbers, which showed resilient performances amidst the present economic woes. This further supports our mid-to-long-term positive outlook. 



 Written by Abiodun Keripe, Managing Director, Afrinvest Research 

Jaiz bank ads

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform.To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.



Nairametrics | Company Earnings