Recouping 12% shaved-off equity investments require patience, urgent strategic reforms- Experts

There are still opportunities to recoup losses incurred this year by investors that are trading on the Nigerian Stock Exchange (NSE), experts have said.

These opportunities, however require the patience of investors and urgent strategic reforms from the government that will spur growth in the economy.

So far, the Nigerian equities market have recorded a 12 percent loss from the beginning of 2019 till date.

The NSE All-Share Index (ASI) which tracks the performance of the equities market, closed trading last Friday at 27,630.46, representing a 12 percent decline from 31,430.50 basis points the equities market opened for trading this year.

As at this time last year, the equities market was also recording a 7 percent decline, suggesting performance is dwindling at a faster pace today.

According to Peter Ashade, managing director of United Capital, the decline in the performance of the market will be reversed when there are policies tailored to spur growth in the economy. Ashade also advocated for reforms that can spur renewed buying interest from both local and foreign investors, during his visit to the NSE last week.

The current decline recorded, is despite the release of half year and second quarter financial results by listed companies. Analysts had earlier predicted that there was potential for the market to record a bullish trend following these releases. The projections were however consequent on how well the companies perform.

An overview of the recently released half year financial results on the Exchange, indicates that about a dozen of the companies reported great performances. But according to market sources, a larger portion of the released results shows slow growth in earnings of some companies and negative returns in others.

The companies’ poor performance are largely affected by a difficult operating environment, and slow policy implementations, said market experts and traders.

Highlighting specific challenges deterring performance growth which in turn affects investor apathy, Garba Kurfi the managing director and CEO of APT securities limited, said the equities market weak performance can be traced to budget delay as well as an absence of fiscal policy. He also noted that historically, election years’ in the country are usually a period where the equities market experience low performance in its lead index.

“Non-passage of the 2019 budget on time by the National Assembly, as it is tagged to capital expenditures also contributed to the poor performance of the equities market,” he said.

Meanwhile activities championed by the regulators and the government authorities to drive growth and deepen the nation’s capital market has begun to pan out as the market capitalization, appreciated by N1.8 trillion to N13.508 trillion as at July 2019 from N11.731 trillion it opened for trading this year, due to three new listings.

The market capitalisation unlike the ASI tracks the growth of the stock market. The growth recorded is attributable to MTN Nigeria, Skyway Aviation Handling Company Limited (SAHCOL) and Airtel Africa. The companies were listed on the NSE in the period under review.

These listings initially sparked some level of positive performance in the market, but market experts insists that policies to sustain the potentials in growth are lacking.

Although the performances looks discouraging, experts urged investors not to panic and begin selling off their stocks. Ambrose Omordion, chief operating officer of InvestData Consulting Limited, advised that equities market investors should hold a long-term view (usually 3-5 years or longer) when investing. Citing the 2017 year when equities market recorded a 42 percent growth as one of the best performing exchanges in the world, he said, with patience, the tides are certain to turn in favour of the market soon and returns will begin to appreciate.

According to Omordion, this period of low performance is a time where discerning investors should take advantage of low valuations and position ahead of year-end.

He noted that investors may also take into consideration the expected economic reforms as government announces its much-awaited new cabinet, just as plans by the Central Bank of Nigeria (CBN) to reduce banks’ participation in government securities is expected to boost private-sector lending to drive economic activities and investment.

He advised that investors should go for equities with intrinsic value and allowing numbers to guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of mixed company numbers, weak economic and market fundamentals.