The Nigerian equity market performance in H1-2020 was a tale of two quarters. Notably, the market tumbled by more than 20.0% in Q1-2020 as FPIs and local investors flew to safety amid the collapse in oil prices and currency adjustments.
However, the stock market recovered by more than half the initial downturn in Q2-2020, spurred by demand from local investors with excess liquidity and few high-yielding investment outlets.
Nigerian Equity Market
Looking ahead, our overall outlook for equities is lukewarm in H2-2020, despite the expansionary monetary policy stance in the global space and the renewed domestic interests pushing stock prices towards pre-pandemic levels.
Although the argument for continued recovery is increasingly compelling from a technical standpoint, we note that weaker company fundamentals heightened by the COVID-19 pandemic, currency movement risks and capital control at the I &E window, are key downside risks that could curtail further recovery.
As a result, we expect the market to remain highly volatile for the rest of the year and ‘short-term gain’ driven. In all, we peg our base case scenario for the YTD performance of the NSE ASI in 2020 at -4.1%. However, we believe these times provide opportunities for long term investors, as stocks that have stood the test of time are still relatively cheap.
UNITED CAPITAL RESEARCH