Equity Investors in Africa’s two biggest economy can sigh with relief as the market seems to be on an upward trajectory since the beginning of February. The Nigerian Stock Exchange (NSE) All Share Index (ASI), for instance, is up by 3.8 percent to close February 15 at 2,4827.5 points, while the Johannesburg Stock Exchange (JSE) ASI has risen by 2 percent to close at 4,9851.85 on the same day. Experts contend that such rises could be worth billions of dollars in the asset sheets of institutional investors, who have become major players in African markets.
This growth indeed contrasts favourably with January when both markets suffered losses. The NSE index, for instance, dropped by a whopping 15.7 percent in January whipping away about $7.6 billion in share value, while the JSE index dropped modestly by 0.8 percent within the same period.
While both indexes are edging up, they are still far from their highest point this year. The NSE index hit its highest mark on January 04 when it hit 28,370.32 points, while the JSE also hit its highest point on the same day when it notched 50275.72 points. When compared to their highest point this year both markets have suffered losses. This means that investors who took a stake in both market in January would still have suffered losses at today’s prices.
But should they now sell off, to limit their losses? Analysts caution against such move. “What we have seen is that quite a few of the companies have gotten to the levels far below their previous 52 weeks low and certain types of investors who are not averse to holding long term positions feel they are buying at good prices,” says Patrick Ajayi, managing director, Woodlands Capital Plc.
Alaba Olusemore, a financial consultant somewhat agrees with Ajayi explaining that stock prices have a tendency to drop in January only to later rebound the following months. “January is the time when some investors offload some of their portfolio for various reasons particularly to have cash,” he says.
Analysts, however, advise investors to have their eyes on both the oil prices and exchange rate which would inevitably influence the direction of the market especially with regards to the Nigerian stock market. “The Nigerian equity market at the moment is driven mainly by the interplay of oil prices and exchange rate policies by government and we might not be able to draw a nexus with the JSE market. This is, however, not to say that other factors don’t affect equity prices,” says Ajayi.
In other words, investors in the Nigerian capital market cannot yet close their eyes and sleep until perhaps oil prices start surging again and the exchange rate becomes more favourable.