Investors in equities lost N1.90 trillion in the third quarter of the year as political risks, macroeconomic concerns and tight financial condition combined to sustain massive sell-offs over the three-month period.
Investors closed at the weekend with double-digit negative return with most companies trading around their lowest values in the period under review.
The steep decline in the third quarter wiped off the modest gain of N257 billion recorded at the end of the first half, leaving investors with a nine-month net capital depreciation of N1.65 trillion. The third quarter witnessed the worst performance as losses increased monthly.
Last month, investors lost N760 billion, about 10.5 per cent increase, on N688 billion recorded the previous month. Quoted equities started this quarter with a net loss of N456 billion in July.
High-wire political risks compounded fragile macroeconomic outlook to moderate investors’ appetite for equities. Minister of Finance, Mrs Kemi Adeosun resigned during the period after discovery that her certificate of exemption from the mandatory National Youth Service Corps (NYSC) scheme was forged.
The period was also highlighted by high-wired political activities as the political parties head toward primaries to pick their candidates for the 2019 elections. Defections, political realignments and continuing bickering between the executive and legislative arms, among others, put politics on the front burner.
“We expect weak sentiments will remain in the near term. Nevertheless, we believe opportunities to buy cheap assets exist for investors with medium to long term investment horizons,” analysts at Afrinvest Securities stated in a weekend note.
Benchmark indices at the Nigerian Stock Exchange (NSE) indicated average decline of 5.97 per cent in September, depressing the three-month decline for the third quarter to -14.40 per cent. With these, average year-to-date return for the nine-month period stood at -14.32 per cent.
The All Share Index (ASI)-the main index that tracks share prices at the NSE, closed weekend 32,766.37 points compared with 38,278.55 points recorded at the beginning of the third quarter. Aggregate market value of all quoted equities also declined from its opening value of N13.866 trillion at the beginning of the third quarter to close the period at N11.962 trillion.
The ASI and aggregate market capitalisation of quoted equities opened this year at 38,243.19 points and N13.609 trillion respectively. The ASI declined by 5.86 per cent to close August at 34,848.45 while aggregate market value of quoted equities dropped by 5.13 per cent to close August at M12.722 trillion.
Association of Stockbroking Houses of Nigeria (ASHON) President, Mr Patrick Ezeagu, said the political process was not engendering investors’confidence as politicians appeared to be more disposed to self-serving intrigues than the interest of the national economy.
According to him, while there might be some macroeconomic concerns, the major risk stoking the decline at the stock market is the political risk.
“The economic team needs to wake up and redirect things appropriately. Let them play less of politics and focus more on the economy. We really need to stabilise ourselves,” Ezeagu said.
He noted that quoted companies have good fundamentals that should ordinarily make them attractive to investors.
From a net capital gain of about N1.7 trillion at the height of its rally in the first quarter, equities closed the second quarter almost flat with average gain of 0.09 per cent for the six-month period ended June 30, 2018, compared with average gain of 8.53 per cent recorded at the end of first quarter.
Nigerian equities recorded average loss of 7.77 per cent in the second quarter, equivalent to net capital depreciation of N1.13 trillion compared with capital gain of N1.384 trillion recorded by the end of first quarter. The ASI closed the first half at 38,278.55 points as against its 2018’s opening index of 38,243.19 points. Aggregate market value of quoted equities on the NSE closed the six-month period at N13.866 trillion as against N13.609 trillion recorded at the beginning of the year, representing net gain of N257 billion or 1.88 per cent. The difference between the ASI and aggregate market value was due to supplementary listings of shares.
Aggregate market value of quoted equities had closed the first quarter of the year at N14.993 trillion as against its year’s opening value of N13.609 trillion, representing a net increase of N1.384 trillion or 10.17 per cent. The ASI also rose from its 2018’s opening index of 38,243.19 points to close the first quarter at 41,504.51 points, representing average gain of 8.53 per cent.
Equities in January hit all-time high with market capitalisation of N15.3 trillion while the ASI had risen to 43,041.54 points, its highest index points since October 2008. However, profit-taking fluctuations that started in March 2018 worsened considerably into a swinging selloff in May 2018. Nigerian equities lost N1.15 trillion in May 2018, equivalent to average month-on-month decline of 7.67 per cent. Nigerian equities had lost N557 billion in March and showed restraint with a modest loss of N44 billion in April.
The chequered performance of the stock market in first half 2018 counterbalanced the optimism that started the year as Nigerian equities closed 2017 with full-year average return of 42.30 per cent, ranking within the top 10 best-performing equities across the world. Aggregate market value of quoted equities had closed 2017 with net capital appreciation of N4.36 trillion.