Nigeria's stock market has remained resilient despite the protests across the country against Police brutality and the excesses of the Special Anti-Robbery Squad (SARS) which degenerated to civil unrest.
Though market watchers had expected that the unrest would create fear and uncertainty among investors who might be concerned about safeguarding their assets, the market defied the odd and rose by 0.22 percent within the 12 trading days the protest lasted, while investors recorded N32 billion cumulative gains.
Recall that equities have been trending upwards since the reduction in interest rate in the money market by the Central Bank of Nigeria (CBN) three weeks ago.
Analysts and other operators said the market has been able to sustain gains due to the liquidity constraints in the Foreign Exchange (FX) market, which has made selling activities by foreign investors impossible.
They also said that investors had off-loaded their portfolios before and during the Covid-19 pandemic.
Analysis of activities within the period showed that the benchmark All Share Index (ASI) that opened at 28,634.35 points on October 8, 2020 when the protest started, climbed to 28,697.06 points at the close of trading on Friday, October 23, 2020, indicating 0.22 percent increase.
Also, the market capitalisation of all listed equities advanced by N32 billion or 0.21 percent to N14.999 trillion from N14.968 trillion on October 8.
On week-on-week basis, the market rose marginally by 0.1 percent on the back of investors' interest in Nigerian Breweries (NB) Plc (+5.7%), Dangote Cement Plc (+0.7%), Stanbic IBTC Holdings Plc (+2.3%) and International Breweries Plc (+18.2%).
Accordingly, the month-to-date and year-to-date returns grew to 6.9 percent apiece.
Commenting, Mrs Toyin Sanni, Group CEO, Emerging Africa Capital Group, said that incredibly low rates in the money market has made retreat to that segment of the capital market unattractive for investors.
"The market is still absorbing the situation to see how long it will last or if it will be properly addressed by government.
"Remember also that the foreign investors already withdrew before and during the COVID-19 crisis for reasons including concerns about our foreign exchange practices," she said, adding that "Domestic investors are less flighty and may see themselves as having fewer choices."
According to her, rates in the money market have already been greatly reduced by deliberate policy intervention by the Central Bank of (CBN). "As such, a sudden retreat to the money market is not immediately attractive," she said.
Also, analysts at Cordros Capital, explained that the social unrest is unlikely to materially dent appetite for stocks as a result of the lingering liquidity constraints in FX which would impede selling activities by Foreign Portfolio Investors (FPIs).
They said that domestic investors that are seeking for alpha-yielding opportunities would take advantage of any sell-off to pick stocks at attractive entry points which would pare losses.
They said: "With the degeneration of the on-going protest into social unrest, we anticipate a knee jerk reaction from investors, which may dovetail into a wider market sell-off, especially if the unrest does not show signals of dissipating.
"We, however, note that the bearish run is unlikely to be prolonged due to the lingering liquidity constraints in the FX market, which will hamper selling activities by FPIs.
"On the other hand, domestic investors seeking alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market are likely to pick up stocks at attractive entry points."
They, however, said that foreign portfolio investors would likely remain on the sidelines for longer as investors adopt a wait-and-see approach amid elevated currency risk.
As a result, the scope for fresh inflows from FPIs through the I & E window appear limited, they said.