Experts have said that it is not a good omen as three leading stock markets in sub-Saharan Africa all ended their transactions in negative territory year-to-date (ytd) as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) and Johannesburg All-Share Index both depreciated by -2.1 percent, and Nairobi Stock Exchange (NSE 20) by 11.0Percent.
This is happening at the beginning of the third quarter within a broader trend in the emerging/frontier economy space as investors track Gross Domestic Products (GDP) closely: curiously, the International Monetary Fund (IMF’s) latest World Economic Outlook, shortly to be updated, sees growth this year and next year in Nigeria at 2.1 percent and 1.9 percent, in South Africa and at 1.5 percent and 1.7 percent respectively. While projection for Kenya is estimated at 5.5 percent and 6.0percent.
According to the FBNQuest Research, Other indicators enter the equation, as NAFEX has proved transformative for the offshore investor in Nigeria.
Total transactions on the NSE have averaged US$20.7million equivalent ytd, compared with US$9.9million in the same period of 2017. However, momentum slowing: the average of the past month has been just US$12.8million.
The Research noted that if the offshore leads and the local follow, we should note that net offshore inflows in April of N6.1billion became net outflows of N68.8billionn in May.
It revealed that its regular analysis of Pencom monthly reports, most recently on July 10 2018, does not suggest that domestic institutions have made a substantial shift from debt to equities.
“We feel that much of the good macro news is already reflected in valuations; the disinflation gains since the start of the year, the recovery of oil revenues, the impressive reserves accumulation and the success of the FGN in tapping the Eurobond market. Nor do we have high hopes of the forthcoming second quarter reporting season.” The Research said.
According to the Research, Ramaphosa bounce in South Africa did not last long: the Johannesburg index has been under water since the start of February.
Nigeria has its own elections coming: in our view, investors are not worried while they feel that the polls will be decisive, and not followed by violence and endless judicial challenges.