An end of year renewed demand by bargain hunters lifted by stock market 5.8 per cent in 12 days on the last month of the year. The bearish trend in the market had depressed the market by 7.27 per cent in the month of November, making operators and other stakeholders to be apprehensive that negative sentiments would persist till the end of the year.
However, a renewed demand by investors, who are taking advantage of low priced stocks, reversed the trend leading to a growth of 5.8 per cent.
Specifically, the Nigerian Stock Exchange (NSE) All-Share Index rose from 25,241.63 to close at 26,707.10 in 12 trading days between November 30, and December 16, 2016. Similarly, market capitalisation added N8.689 trillion to N9.189 trillion within the same period.
Investors renewed demand for oil/gas and banking stocks. Particularly, most investors have been swayed to oil stocks by the decision of Organisation of Petroleum Producing and Exporting Countries (OPEC) and non-OPEC members, who agreed a deal to curb their production. This decision led to a rally in the price of crude oil, which has in turn increased demand for oil stocks.
This development led to a recovery of 5.8 per cent or N500 billion within 12 days, compared with a decline of 7.27 per cent.
Analysts at FSDH Research had said the equity market recorded its second largest month on month loss in November, saying that macro-economic challenges continued to affect quoted companies.
They said, market activities picked up in the month of November 2016, compared with October 2016.
The volume of stocks traded increased by 65.96 per cent to N6.09 billion. The value of stocks traded also increased marginally by 0.56 per cent to N32.20 billion.
According to them, the movement in the NSE ASI in November showed that the equity market is awaiting clear economic policy direction for investors to take positions.
“Any positive pronouncement in December 2016 from the federal government that will improve confidence in the economy will likely lead to a modest appreciation in the equity market. The planned crude oil production cut may have positive impact on oil price. Consequently, equity prices may respond positively,” the analysts said.
Making recommendation on what investors should do, FSDH Research advised investors to maintain a medium to long term position in the equities market.
“We recommend that investors should maintain a medium-to-long term position in the equity market. We reiterate that long-term investors should take long positions in stocks that have strong fundamentals,” they said.
The analysts added that the performance of the equity market in the last three years shows that the market recorded positive performances between November and December.
“However, the current economic headwinds and the initiative of the government may determine the movement in the equity market in December 2016,” they stated.