The market capitalisation of equities listed on the Nigerian Stock Exchange has declined by N1.3tn from N12.135tn recorded in April as bearish sentiment in the Nigerian stock market held sway last week.
The equities market lost N273bn in market capitalisation last week as it dipped from N11.108tn, at which it opened on Monday, to seal at N10.835tn on Friday.
The fall in market value followed lasting equities sell-offs by foreign and local investors, forcing stocks to decline to a three-month low last Tuesday as investors who were troubled about a shortage of dollars on the foreign exchange market sold shares.
The stock market had rallied remarkably following the emergence of Muhammadu Buhari as president, after weeks of sell-offs on the back of political tensions before the election. The market capitalisation of listed equities hit a pinnacle of N12.135tn on April 2.
But since then, the country’s stock market has constantly taken a hit from worries over the continued slide in the naira and the impact of persistently low oil prices on government finances.
Analysts at Meristem Securities Limited in their investment guide for the week and outlook for the second half of the year, stated that though they expect the existing challenges to persist into the second half of 2015, they look forward to intermittent upswings in market mood, driven by trickles of positive news inflow from the political space and position-taking in fundamentally justified stocks.
The analysts disclosed that they were not optimistic about the banking sector’s prospective performance for the second half of the year, given the rising cost of funds, limits on non-interest income generation, impaired economic fundamentals and waning quality of loans, even as higher yields on assets are expected.
“Pricing of stocks might also be dragged by expected lower dividend yields from the need to conserve capital.”
The Meristem analysts stated that the insurgency in the Northern part of the country, poor nature of supporting infrastructure, and devaluation of the currency had dragged the agricultural sector in the year.
They also reported that they are not hopeful of a turnaround in the near term, as the listed agricultural sector companies are being affected by the supply glut in the international rubber industry and consequent fall in, devaluation of the naira commodity prices and the effect on imports of some raw materials, among others.
“The consumer goods sector had a stormy half year, owing to the direct impact of economic realities on the sector and component companies. The hardest blows were however the naira devaluation and the closure of the RDAs market, coupled with production challenges in the form of gas disruptions.”
Noting that most outlined consumer goods equities endured negative year-to-date returns, the analysts anticipate a better outing for these equities in the concluding half of the year, riding on relatively low market prices, as the component companies adjust to the economic realities and probably release better scorecards.