Stock Market To Remain Volatile

March 23, 2020
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The Nigerian stock market will remain volatile today Monday March 23 given the circumstances surrounding the macro-economy and oil prices. Brokers will also continue to price-in the economic impact of rising coronavirus confirmed cases in Nigeria which has risen to 35.

Though, it is expected that as dealing members trade stocks this week, they will react to more dividend pronouncements and position in stocks with good fundamentals, given the current depressed prices.

Investors had in the face of declining crude oil prices, growing risk of currency devaluation as well as the rapid spread of the Coronavirus in the country, shunned stocks’ buying, which led to increased supply side in Nigeria’s equities market and subsequent loss of about N280billion in the review trading week.

The market will continue to react to events in the crude oil market as well as news surrounding the Coronavirus, according to Lagos-based research analysts at Vetiva. They noted that local bourse recorded another negative week-on-week (WoW) performance “as overhanging uncertainties in the global and domestic spaces continue to weaken investors’ confidence.”

Despite its positive close on Friday, the Nigerian stock market declined by 2.35percent in the review trading week as financial markets remain fragile. Month-to-date (MtD) the stock market has decreased by 15.33percent while this year only it has dropped by 17.30percent.

The Nigerian Stock Exchange (NSE) All-Share Index (ASI) depreciated from a week-open high of 22,733.35 points to 22,198.43 points as at Friday, March 20, 2020. Also, the value of listed equities on the Nigerian Bourse decreased by N279 billion, from N11.847trillion to N11.568trillion.

Afrinvest research analysts had expected this record bearish performance “as the economic outlook of the country remains uncertain.”

With the current outbreak of Coronavirus (COVID-19), the world is witnessing an unprecedented health situation and global uncertainty. Brent Crude traded at $28.42 per barrel as at 3 pm Nigerian time on Friday.

“Coronavirus is rattling the healthcare, financial and economic systems around the world. Although, the impact on Africa countries initially seemed to be limited to the external account and financial markets, which are considered secondary due to net foreign capital reversals.

“However, with an increasing number of cases in the continent, monetary and fiscal authorities are forced to double down on their efforts to curb the spread of the virus, as the primary impact of the outbreak is set to add an extra layer of domestic challenge to the growing problem”, said United  Capital research analysts in their March 20 note.

The Central Bank of Nigeria had towards the close of stock market trading on Friday moved the FX sales rate to FPIs to N380.2/$, from N366.7/$, in a move that suggests a technical devaluation of the naira.

The CBN sold the dollar at N380.2 on the I&E window last Friday, though the official rate was still N306/$. Market watchers expect an announcement of an adjustment to that rate by Tuesday.

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