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NSE remains worst performer in Africa as investor apathy persists

By on February 12, 2015

The performance of the Nigerian Stock Exchange (NSE) remained the worst among leading African exchanges  as investors delay their return to the  Nigerian market.

The NSE All-Share Index had recorded one of worst performances in the world in 2014 by shedding 16.1 per cent compared to a positive performance in 2013. Market stakeholders had hoped that the opportunity presented by the highly discounted equities would  attract investors to the market in 2015 and lead to positive growth. However, the uncertainties over the general elections and continuous decline in price of crude oil kept many investors away from the market. Consequently, the market fell by 14.7 per cent in the first month of 2015.

THSIDAY checks revealed that  with a year-to-date decline of 15.2 per cent as at Monday, the NSE remained the worst performing among the African exchanges.

The second exchange that has recorded a negative performance is Ghana Stock Exchange (GSE), which recorded a YTD decline of 4.6 per cent as at Monday.
Other exchanges recorded positive performance led by Egypt with 10.7 per cent. Johannesburg   Stock Exchange 4.4 per cent, while Mauritius and Kenya Exchanges boast of 4.04 per cent and 3.7 per cent growth respectively.

However, the negative performance of the NSE is not essentially due to poor market fundamentals of listed companies  but the impact of the  uncertain polity as investors  are delaying  their return  and continue to monitor events leading to the general elections.

Analysts said the negative performance may continue until after the elections, contending that the postponement of the elections is not a good development for the market.

For instance, analysts at WSTC Financial Services Limited, said   the rescheduling of the elections was deferring both socio-political stability and reprieve for the financial markets.

“Summarily, we believe that the rescheduling of the general elections is tantamount to deferring both socio-political stability, and consequently, reprieve for the financial markets. We believe this does not in any way bode well for ailing investors’ confidence and already lean capital inflows,” they said.

According to them, although   they expect market reaction to elevated political risks to create attractive entry points, they hold  a cautious view on equities.
“Except for a significant reversal in the international prices of crude oil in the near term (which looks most unlikely), we expect the lull in the equities market to remain, at least, in the pre-election period, given a strong positive correlation between the performance of the Nigerian equities market and investors’ perception of domestic risks. In addition, we reckon that expectations of depressed corporate earnings and low dividend pay-out (on account of regulatory headwinds in the banking sector) will further subdue prices in the equities market in the near term,” they said.

However, the Managing Director of Crane Securities Limited, Mr. Mike Eze said discerning investors should use the opportunity of the low prices of equities to increase their stakes in the equities market.

“Not undermining the implication of the current political tension on the market, investors should scan through the market and invest in some of the stocks with good fundamentals but have been highly discounted due to the long bear run,” Eze said.

 

[ThisDay]