Equity market opens week’s trading on bearish note

The equities market closed yesterday on a negative note, as Nigerian Stock Exchange [NSE] All Share Index [ASI] depreciated by 0.32 per cent to close at 31,628.85 basis points, compared with the 0.12 per cent depreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at 8.74 per cent

Market breadth also closed negative as Unity Bank led 10 gainers against 31 losers topped by Transexpr at the end of yesterday’s session- an unimproved performance when compared with previous outlook.

Market turnover equally closed negative as volume declined by 44.35 per cent against 113.78 per cent uptick recorded in the previous session. Transcorp, Multiverse and Zenith Bank were the most active to boost market turnover. Zenith Bank and Dangote Cement topped market value list.

Volume shockers included Multitrex which led the list of active stocks that recorded impressive volume spike at the end of yesterday’s session.

Meanwhile, the Nigerian Stock Market has recorded a streak of nine straight day of losses, the longest losing streak since the first week of May 2015. In fact, the market has not recorded a single gain in the first 10 days of the month of July 2015.

Proshare analysts traced the current stock market sell-offs to the Governor of the Central Bank of Nigeria[CBN], Godwin Emefiele.

They explained: In the last two weeks, the governor released a rash of circulars that have basically widened the gap between the Interbank and the Parallel market by an incremental margin of about N20.

‘’ From about N220 before the ’41 circular’, the naira depreciated to close at N240 on Friday. By issuing a circular restricting access to the forex market for 41 items the CBN essentially sent the black market into a spurious speculation spree.
‘’This now increased calls for the Naira to be devalued, further exacerbating the situation. In anticipation of devaluation, investors are basically selling off their shares and hoping to come back after the naira eventually becomes devalued,’’ they said.

The analysts also said that the President and his team are yet to provide a visible economic direction for the country leaving potential investors with no choice but to stay out of the market.

The analysts also traced the continuous sell-off to the financial crisis in Greece which has affected markets around the world as the fear of a Greek Exit from Europe is thought to be a bad sign for the world economy.

The Greek Prime Minister Alexis Tsipras had been adamant to accept a deal from Europe and instead took his country on a round of referendum.

Unfortunately for him, said the analysts, his country voted in droves to reject the European deal which many Greeks saw as another round of unbearable austerity. Based on that, Investors (especially Foreign Portfolio Investors) have been selling off liquid assets in emerging markets. Many feared for another market turmoil in the event that a spill over effect occurs if Greece can’t sign a deal by Sunday and end up being expelled from the Euro.

In addition, the Chinese have been riding a stock market bubble for the last seven years only for them to realise the stock market is not all it seems.

In a classic case of what happened to Nigeria in 2009, many Chinese investors had invested in the stock market in a bid to cash in on the bullish run it had been enjoying. Just like Nigerians did back then, the Chinese borrowed massively from banks (margin loans) and invested same in the stock market.

However, as soon as confidence waned many people started selling triggering a ripple effect that has now seen them lose over $3 trillion dollars in value in less than a month. The analysts added that the fear of a contagion and the economic and political landscape in Nigeria is also a crucial factor that can explain why our markets is experiencing a downturn.