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Equity investors rake N1.66tr gains in Q2 - THE NATION

JULY 06, 2020

By Taofik Salako, Deputy Group Business Editor

Nigerian equities witnessed a major recovery in the second quarter with positive average return of 14.12 per cent within the three-month period, representing net capital gains of N1.656 trillion.

The second quarter performance was, however, overshadowed by net loss of N2.68 trillion in the first quarter, leaving investors with net loss of N1.14 trillion for the six-month period.

Benchmark indices at the Nigerian Stock Exchange (NSE), which are generally regarded as sovereign equity indices for Nigeria, showed that Nigerian stocks swiveled through steep decline in first quarter and a major recovery in early months of the second quarter.

The All Share Index (ASI)- a common value-based index that tracks all share prices at the Exchange, closed first half at 24,479.22 points as against 26,842.07 points recorded as opening index for the year, indicating negative six-month average return of -8.80 per cent.

The index had posted a double-digit negative return of 20.7 per cent in the first quarter, driven by a steep decline of 18.75 per cent in March. The six-month performance, though still negative, was moderated by the two-month successive rally in April and May, which saw equities recording a two-month average return of 19 per cent. The market relapsed in June with average decline of 3.12 per cent, a loss of about N410.8 billion.

With net loss of about N2.68 trillion in first quarter 2020, the half-year return, though negative, indicated considerable recovery within the second quarter. Nigerian equities recorded positive average return of 14.12 per cent in the second quarter, equivalent to net capital gains of N1.656 trillion for the three-month period. The ASI had closed March 2020 at 21,300.47 points.

“The markets may remain volatile in the near term. We advise investors to accumulate quality stocks at lower levels with a long-term investment horizon,” FSDH Group, a major investment banking group, stated in its outlook.

Data provided by SCM Capital, an investment banking firm, indicated that average loss for foreign portfolio investors, who denominate in Dollars, could more than doubled average decline in Naira terms. Aggregate market value of quoted equities, which showed unadjusted decline of 1.46 per cent in Naira terms, declined by 16.20 per cent in Dollar terms.

The market has continued to struggle with domestic macroeconomic uncertainties, global decline in crude oil price and trade wars and the ravaging COVID-19 pandemic.

Chief Operating Officer, GTI Capital, Mr. Kehinde Hassan, said the stock market was impacted by the global market variables and domestic foreign exchange management, which negatively influenced foreign portfolio participation in the market.

The Nation had exclusively reported that foreign portfolio investments (FPIs) in the Nigerian market dropped to a 29-month low in May 2020, the latest available figure. Total FPIs dropped to N35.24 billion in May 2020, its lowest month-on-month record in the past 29 months.

Chairman, Association for Securities Dealing Houses of Nigeria (ASHON), Chief Onyenwechukwu Ezeagu, said FPI decline was due to a myriad of factors including uncertainty about the full impact of COVID-19 on the  economy, Naira depreciation, limited availability of foreign exchange, inconsistencies in monetary and fiscal policies and global oil glut.

President, Association for the Advancement of Rights of Nigerian Shareholders (AARNS), Dr. Faruk Umar, said the outlook for the second half at the Nigerian stock market would be mixed with the impact of COVID-19 weighing more heavily in the third quarter and a recovery in the fourth quarter.

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