Investors in equities have lost N1.38 trillion over the past seven months as the onset of the first half earnings season failed to sustain expected recovery at the stock market. Nigerian equities suffered their worst depreciation so far this year in July, dropping an average of 7.50 per cent, valued at about N990.45 billion.
The steep decline in July worsened the average year-to-date return, which closed first half at -4.66 per cent, to -11.81 per cent, equivalent to net capital depreciation of N1.38 trillion for the seven-month period.
With a drop of 17.81 per cent in 2018, the continuing decline at the equities market implied average decline of 29.62 per cent over the past 19 months. This implies that average investors, who had invested over the period, had lost almost a third of their portfolios, altogether implying a loss of about N4 trillion for the entire market.
Nigerian equities have traded mostly on the negative this year, declining in five out of the seven past months. The market also closed both the first and second quarters on the downside and most analysts remained cautious about the outlook for the third quarter.
The All Share Index (ASI) – the main value-based index that tracks share prices at the Nigerian Stock Exchange (NSE), closed July at 27,718.26 points as against its month’s opening index of 29,966.87 points, June’s closing index. The ASI had opened 2019 at 31,430.50 points, 17.81 per cent down from its 2018’s opening index of 38,243.19 points. It, however, rallied a world-leading gain of 42.30 per cent in 2017.
United Capital Asset Management Limited Managing Director, Odiri Oginni said despite the attractiveness of Nigerian equities when compared to other African and emerging markets, interest in Nigerian equities may remain depressed for the rest of the year as the overall economic condition remains challenging.
Analysts at Cordros Securities said they were maintaining a conservative outlook for the Nigerian equities market in the short to medium term.
Analysts at Afrinvest Securities said the market may continue on the negative side as investors appear to be maintaining a risk-off approach to the market.
The listing of Airtel Africa Plc during the month, however, boosted the total market capitalisation of all quoted equities. Aggregate market value of all quoted equities rose from its month’s opening value of N13.206 trillion to close July at N13.507 trillion. The NSE had listed a total of 3.8 billion shares of Airtel Africa at N363, adding N1.4 trillion to the equities market capitalisation.
The unabsorbed impact of the listing of Nigeria’s largest telecommunication company, MTN Nigeria Communications Plc in May 2019, had also coloured the market capitalisation with a resemblance of gain. The NSE listed 20.35 billion ordinary shares of MTN Nigeria at N90 per share, representing initial listing value of N1.83 trillion. The new listing and subsequent rally moved the market capitalisation to a gain of N2.726 trillion in May 2019, one of the two months that ended positive. The other positive month was February 2019.
With the MTN effect, aggregate market value of all quoted companies on the NSE had closed first half at N13.206 trillion, implying a gain of N1.49 trillion during the first half. Market capitalisation of equities opened 2019 at N11.721 trillion. It opened 2018 at N13.609 trillion.
Based on market values, both the ASI and market capitalisation are correlated indices and without new listing or delisting, usually move simultaneously in the same direction. But the ASI is weighted, and as such adjusted for effect of new listing while the market capitalisation is a straight-line summation of share prices and issued shares. Thus, where the ASI and market capitalisation differ, the ASI is widely regarded as the true representation of the market condition.
The market started 2019 with a loss in January, rallied to appreciable recovery in February and relapsed into negative again in March. It continued on the bearish side in April before the MTN Nigeria’s listing provided a breather in May and then relapsed in June.
Nigerian equities lost N326 billion in January 2019, with average decline of 1.82 per cent. The ASI and market value of equities had closed January 2019 at 30,557.20 and N11.395 trillion respectively. In February 2019, investors in Nigerian equities netted N433 billion in capital gains as the stock market staged a major recovery. Average return for the month stood at 3.80 per cent. The ASI and market value of quoted equities had closed February higher at 31,718.70 points and N11.828 trillion respectively. The market rounded off the first quarter with a net loss of N156 billion and average decline of 2.135 per cent in March 2019.
The market suffered a major contraction in April as the bearishness defied earnings reports and dividend recommendations. Quoted equities lost N714 billion in April. The ASI dropped from April’s opening index of 31,041.42 points to close the month at 29,159.74 points, representing average month-on-month decline of 6.06 per cent. Aggregate market value of all quoted equities also dropped from the month’s opening value of N11.672 trillion to close at N10.958 trillion.
In May 2019, aggregate market value of all quoted companies at the NSE closed at N13.685 trillion, N2.726 trillion above the opening value of N10.959 trillion for the month. The gains of N2.726 trillion included entry listing value of N1.83 trillion added by the listing of MTN Nigeria. The May rally moderated the negative average year-to-date return, which opened the month at -7.22 per cent, to -1.15 per cent for the five-month period.
The reversal in the past 19 months has raised the spectre of the bearishness that gripped the market between 2014 and 2016. The turn-around in 2017 represented a fillip for the hard-pressed Nigerian investors. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion. Aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE) closed 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.