Slow Economy admidst Naira Volatility, Lack of Policy direction | Independent Newspapers Limited
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Slow Economy admidst Naira Volatility, Lack of Policy direction

Posted: Jul 6, 2015 at 12:00 am   /   by   /   comments (0)

Bullish sentiment at the early trading sessions of last week was short lived after the month end portfolio repositioning and window dressing by fund managers.  This was in addition to negative sentiments in the global financial market as Greece defaulted in the repayment of its debt to the International Monetary Fund (IMF) and subsequently the suspension of Eurozone bailout for troubled nation.

Back home, Nigeria’s deepening debt profile and a seeming lack of clear direction as to where the economy is heading, as the government remains silent on its economic reforms policy agenda has slowed down business activities, having kept investors waiting on the sideline. The disintegrating economic fundamentals of the nation at this current time calls for urgent attention of the government and its agencies to put measures and indeed take steps to savage the situation, to build formidable capital that would drive the expected growth and development of Nigeria’s economy to deliver the prosperity promised for all.  The socio-political and economic factors needed to chart a new course for this nation should be put in place, instead continually shifting the goal post.

The equity market reversed southward last week, as prices remained in the negative territory due to highly capitalised stocks suffered price losses due to profit taking activities of wary investors The market’s composite All Share Index and market capitalisation dropped 0.96 per cent to close at 32,538.34 and N11.11 trillion respectively. The prevailing negative sentiment has further pushed the year-to-date returns of the market further into the negative territory at 5.58 percent.

The market momentum remains bearish as more equities closed in the red to reflect weak market that had dominated trades in last 15 trading sessions. As the index trades below its shortest moving average of 20 days, signaling over-sold region, which suggests that reversal is imminent, especially now that half year scorecards have started rolling in with Infinite Trust Mortgage Bank being the first to release its second quarter earnings report to the market.

The ASI rallied 1.84 per cent in the first two trading days of week bouncing back to the 33,000 points, before shedding 2.74 per cent, due to sell pressure on the part of retail investors and market players. This just as fluctuation in the Naira against international currencies increase the risk in equities’ trading.

Owing to these factors, the NSE’s market capitalisation lost about N110 billion from its previous week’s level to close at N11.11 trillion as high caps shed some weight. The sectoral index for the week had a mixed performance as some were in the green while others closed red. The NSE INDUSTRY and NSE OIL/GAS led the gainers with 0.13 per cent and 2.27 per cent respectively, while the NSE CONSUMER GOODS index led the losers with 2.47 per cent, with investors standing on the sideline to watch events unfold before jumping back to the fray

The volume of transactions and value for the week dropped by 15 percent and 37 percent respectively relative to the levels recorded in the previous trading week as more investors and traders applies caution as the economy continued to slow down. At the close of trading activities last week, 1.22 billion shares valued at N16.75 billion were exchanged in a higher number of deals of 18,497 compared with 1.44 billion shares valued at N26.41 billion exchanged in 17,679 deals recorded in the previous trading week.

Market Outlook

We expect mixed trading sentiments as investors continue to keep their gaze on macro events in the country as the government has not given a clear economic policy direction that would guide investment decisions of the investing public. We however expect some re-entry at the beginning of this week as investors take advantage of the current under-priced stocks in the financial service, building material, agriculture and healthcare.



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