Nigeria's Capital Market Astounded as Global Price Crashes

Last week’s massive losses in the international commodities and financial markets have resonated further in the Nigerian space at the opening of business yesterday as the Nigerian Stock Exchange,
NSE, benchmark index, the All Share Index, ASI, declined 2.2 per cent  to 29,214.13 points bringing Year-To-Date loss to 15.7 per cent, the greatest loss in six months.

Investors lost N227.7 billion yesterday to peg market capitalization at N10 trillion at the close of market. Likewise, market activity declined as value and volume traded shed 43.9 per cent and 25.5 per cent to N2.8 billion and 257.7million units respectively.

This development came as oil price crash in the international market continued with Brent Crude, Nigeria’s Sweet Crude benchmark, and West Texas Intermediate crude both traded at six-year lows of USD43.48 (down from last weekend’s price of USD45.46 and USD38.89 (down from USD39.89 last weekend) a barrel, respectively.

Basic provisions of 2015 budget

This meant further erosion of Nigeria’s ability to implement the basic provisions of 2015 budget.

Financial and investment bankers who spoke to Vanguard yesterday at close of markets indicated that they expected the development in the international markets to worsen market outcomes in Nigeria this week.

According to Afrinvest Group,  a Lagos investment banking  firm; “Today’s (yesterday) performance reflects the negative sentiments that have persisted in the Nigerian equities market.

Given the sustained run of losses in the market and the absence of a catalyst to excite investors, performance is expected to be driven by speculations in the short term, thus, we advise investors to maintain medium to long term investment horizons as headwinds continue to bedevil the equities market in the short term.
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The bears had sustained its reign over the Nigerian stock market last week as the market closed in the red on four trading days of the week extending weekly losses for the third consecutive week.

Analysing the global trend Afrinvest economists had said “negative investor sentiments persisted across regions given sustained pressures on oil prices while slowdown in the growth of the Chinese economy (world’s 2nd largest economy) has further exacerbated poor sentiment.”

The analysis

The analysis added that the recent devaluation of the Chinese currency, Yuan, has heightened uncertainties across regions, prompting a further pullback in the global equities markets last week.

Global equities market had extended downward trend Week-on-Week (W-o-W). In the developed markets, the UK FTSE sustained its bearish run as the index lost 4.1per cent W-o-W. The European markets continue to grapple in fears of a slower Chinese GDP growth. This was observed in the performance of the German DAX and France CAC which declined 5.8 per cent and 4.6 per cent W-o-W respectively despite manufacturing data that showed stronger growth during the week.

Asian markets

In the Asian markets, the China Shanghai Composite index tumbled 11.5 per cent following the release of manufacturing data that showed a slowdown in pace of growth after the recent devaluation of the Yuan. Similarly, the Hong Kong Hang Seng and the Japan Nikkei depreciated 6.6 per cent and 5.3 per cent respectively as negative sentiments linger on in the markets.

In the rest of the BRICS markets, Russian RTS declined 7.4 per cent as persistent fall in oil prices coupled with economic sanctions heightened negative sentiments towards the market. The Brazilian IBOVESPA showed signs of improvement close to the end of the week as a mild rally lifted the market. However, the index slipped 3.5 per cent to close the W-o-W in the red. The South African FTSE and India BSE also dipped 3.3 per cent and 2.5 per cent respectively.

In Asia, the Shanghai Composite Index slid 8.5 percent and Hong Kong’s Hang Seng Index fell 5.8 percent, tumbling further into a bear market. The measure is about 25 percent below an April high, with a gauge of price momentum dropping to the lowest since the October 1987 stock-market crash.

Greater China equities

Greater China equities plummeted, with Taiwan’s benchmark gauge dropping as much as 7.5 per cent. More than USD4 trillion was wiped from the value of Chinese equities from June 12, 2015 to last weekend.

Performance of the African markets mirrored other regions as all the markets along with Nigeria’s traded downwards W-o-W save for the Ghana GSE (+0.7 per cent). The Egypt EGX lost the most (-9.0 per cent) W-o-W, followed by the Nigerian All Share Index (-2.7 per cent), and the Kenya NSE (-2.0 per cent).

The Bloomberg Commodity Index fell 1.8 percent, heading for the lowest closing level since August 1999.