Low prices boost the stock market by 113 billion naira in July

By Goddy Egene

The stock market posted a positive performance in July, with investors earning 113 billion naira, compared to a decline of 399 billion naira in June.

Market capitalization, which measures the value of all stocks, fell from 12.766 billion naira to 12.882 trillion naira, indicating a growth of 0.8 percent, while the all-stock index of the Nigerian Stock Exchange ( NSE) increased by the same margin from 24,479.22 to 24,693.73.

The market, which fell more than 20 percent in the first quarter, rallied in the first and second months of the second quarter as investors took advantage of low stock prices. But profit taking led to a decline in June.

However, the market ended July, which is the start of the second half of the year, with growth of 0.8%.

Market participants linked the positive performance to bargaining hunting and positioning ahead of corporate earnings for the six-month period ended June 30.

While some investors traded cautiously while awaiting corporate results, some took advantage of low prices to enter the market, hence the gain recorded during the month under review.

Although the market saw growth in July, analysts at Cordros Securities Limited said their view continued to favor cautious trading as risks remained on the horizon due to a combination of the growing number of cases. COVID-19 in Nigeria and weak economic conditions.

Thus, we continue to advise investors to seek trading opportunities only on fundamentally justified stocks, they said.

Some market participants had said that one of the factors that will determine the direction of the market for the second half (S2) of 2020 will be the results of companies for six months until June 30.

In their assessment, analysts at Afrinvest (West Africa) said the first half (HI) of the year warns of an overly optimistic outlook for the second half.

We expect the recovery pattern at the end of the first half of 2020 to be sustained due to an improvement in risk appetite mainly from locals and an improvement in external conditions. That said, we note that the downside risks to our expectations include the tightening of the partial economic reopening due to the new wave of the COVID-19 spread, the drop in oil prices, the MSCI classification of the Nigerian market. as stand-alone, the continued illiquidity of currencies and lower than expected economic and earnings growth, they added.

Previously, traders advised sophisticated investors to take advantage of the current low prices and increase their investment in the market.

For example, a stock broker, Mr. Ayo Oguntayo, said: Just like the scenario that happened after the first quarter decline when investors looked at stocks due to their low prices, the decline June provided an opportunity for sophisticated investors to get ahead. the publication of the financial performance of companies in the first half of the year.

“While there is some apprehension that the COVID-19 pandemic could impact bottom lines, it is possible that some companies are still achieving positive results as many of them have activated their business continuity plans. activities that helped mitigate the negative impact of the lockdown, Oguntayo said.

Also speaking, Wyoming Capital and Partners CEO Mr. Tajudeen Olayinka said stakeholders now have a better understanding of the pandemic and everyone has to live with it, in the future it is unlikely. that the market will reconsider the experience it had at the start of the pandemic.

However, the market must analyze the expected results of the first half, to determine the impact of the pandemic on listed companies, before making new investment decisions or charting a path forward. More importantly, the impact of the various measures put in place by the government on the economy as a whole. On the balance of probabilities, we might see a better market in the second half of 2020, Olayinka said.

In addition, market operators said that H2 would also be positively affected by the words of assurance from the Managing Director of the Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, that investments in the market would be protected.

We want to assure investors that this market is for them and we are prepared to do anything to ensure that we increase investor awareness through education, strong regulation and fair trading. For those who want to defraud investors, there would be no respite because we are ready to fight market manipulation to the end, anyone who flouts our rules will be forced to face the consequences of their actions, Yuguda said. .