Capital market experts have linked the unprecedented lull witnessed in the nation’s stock market in the first quarter (Q1) to shift in the demand for equities for fixed income securities by Foreign Portfolio Investors, FPIs.
The experts also attributed the downturn to the exit of foreign investors that play dominant role in the stock market following the unstable macroeconomic environment after massive sell-off of shares.
According to them, another major factor was the delisting of 25 listed firms from the daily official list of the Nigerian Stock Exchange (NSE).Specifically, an economist, Johnson Chukwu said equities market has been sluggish because the PFAs were not aggressively investing in the equities market.
“This is because they were unable to meet up with the post-listing requirements. The environment was indeed challenging that companies that were relatively strong and listed have become so weak that they could not meet up with the post-listing requiremenst.
Chukwu, however cautioned the domestic retail investors to be careful in their investment decision on equities as the market is likely to record continuous drop given the challenging macroeconomic environment in the build up to general election.
The Chief Research Officer of Investdata Consulting Limited, Ambrose Omodion said investors are currently trading with caution because of fear of political risk and the believe that any perceived violence in the country may trigger panic and massive dumping of shares.He said the development has spurred apathy and low investors confidence in the market as foreign investors that play dominant role have resorted to massive selloff of shares in the market.
“The weak response to earnings surprises is evident in low liquidity in the market, especially as at April-end when Nigeria’s 2018 budget was still facing so much uncertainty, leaving the economy to run entirely on monetary stimulus.”