Nigeria: Equities Market Ends Q1 Negative

5 April 2021

The equities market ended the first quarter 2021 (Q1'21) on a bearish note with investors losing N628 billion following inflationary concerns, and uptick in fixed income yields among other market factors.

After starting the year on a positive note, the equities market made a total reverse in February and sustained the mood to the end of March.

Though the level of losses was much lower in March, the two months of consecutive losses resulted in a negative return at the end of the quarter.

Consequently, the benchmark All Share Index (ASI) fell by 3.04 percent to settle at 39,045.13 points from 40,270.72 points at the beginning of the year.

Similarly, the market capitalisation of all listed equities closed lower at N20.428 trillion from N21.056 trillion at the beginning of the year, representing 2.98 percent decline.

Already, the market has started the month of April on a negative note with the index recording a negative return of 0.29 percent.

Financial analysts are also projecting that the market would end the second quarter on a bearish note.

Analysts at DLM Capital said the market would likely remain flat within the second quarter of the year as investors (domestic retail and institutional) who committed their capital during the rally have not recouped their investments.

On the other hand, they stated that an upside to sentiment would only occur if fixed income yields trend downwards.

They stated: "Institutional participation year-to-date comes to N217.21 billion in 2021 when compared to a full year's transactions of N121.24 billion in 2020. With N12 trillion in pension assets, the institutional side almost doubled the volumes they transacted in over 2020, this comes to a paltry maximum of 1.8% of assets.

Also, both retail and institutional investors ended with more than 80% of their inflows as outflows, reflecting a short holding period.

"In the absence of any major market spur, we expect the market's performance in the quarter to be relatively flat, as investors who made the recent transactions, have not got a lot in their holdings. We expect this effect to limit the downside to the market's performance.

"An upside would only come with renewed interest, especially if yields in the fixed income go progressively lower."

On the contrary, Mallam Garba Kurfi, Managing Director/CEO, APT Securities and Fund, said that the recent decision by the Central Bank of Nigeria (CBN) to hold the Monetary Policy Rate, MPR, at 11.5 percent would redirect funds to equities.

According to him, "The Q2 will hopefully close in the positive in view of the good results. The recent decision by CBN will sustain the tempo of the capital market.

"The rising inflation will push most investors not to hold cash because of the devaluation of the naira. They rather hold asset including stocks."

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