‘Demand for treasury bills, bonds to dampen investors’ interest’

Most stocks are expected to bottom out following disappointing earnings while sustained demand for treasury bills and bonds will likely continue to dampen investors’ interests in equities, Managing Director, Financial Derivatives Company (FDC) Limited, Mr. Bismark Rewane, has said.

Rewane, who stated this at the FDC Bi-monthly Economic and Business Update, said that the Nigerian equities market had underperformed most global indexes tracked across frontier, emerging and developed markets. He said: “The NSE ASI is in contrast with major global indexes having declined by 0.63 per cent year-to-date. The MSCI World and Emerging Markets indexes have had positive returns YTD, gaining 5.7 per cent and 9.11 per cent respectively, while the Frontiers index has lost 2.42 per cent YTD.”

He noted that in Africa, the Johannesburg All Share index (JALSH) and the Ghana Stock Exchange Composite Index (GGSECI) have advanced by 8.55 per cent and 2.06 per cent YTD respectively. On the other hand, the Nairobi Securities Exchange 20 Share Index (KNSMIDX) and the Egyptian EGX30 Price Return Index (CASE) have trended downwards in tandem with the NSE ASI. Rewane had, early in the year, noted that investors remained cautious as the oil prices continue to dwindle. “The challenging economic outlook continues to fuel negative sentiments on the capital market given the huge drop in oil prices.

Oil prices recorded over 50 per cent drop and for a country like Nigeria, which earns up to 80 per cent of its revenue from the commodity, this trend has translated to a weaker currency, increased inflationary pressures and debt burden,” Rewane said. He noted that most investors had opted for fixed income assets, cash or forex over equities, highlighting the extent of risk averseness of investors as a result of this trend. “The market continues to maintain a downward trend in the first weeks of 2015.

The Nigerian Stock Exchange All Share Index so far has plunged by 16.87 per cent to 28,811.39 between the 5th and 15th of January, its lowest level since December 2012,” FDC boss said. He explained that the downward trend has been attributed to the combination of a sustained drop in global oil prices, profit taking, and uncertainty ahead of the election, the weakening naira and increased violence in the northeast driven by Boko Haram.