Nigerian Equity Market Reacts to Heightened Political Uncertainty: 9 Feb 2015

Equity Market Reacts to Heightened Political Uncertainty… ASI Slumps 208bps
The Nigerian Bourse expectedly experienced sell-down pressure today as investor sentiment weakened. This is premised on the heightened uncertainties surrounding the socio-political environment due to the postponement of the 2015 general elections announced over the weekend. Against this backdrop, the All Share Index (ASI) declined 208bps on the first trading day of the week to close at 29,360.55 points, pushing the YTD losses to 15.3%. The significant selloff in the market was driven by majorly by sell downs in blue chip Consumer and Industrial Goods equities — Nigerian Breweries (5.0%), Dangote Cement (1.7%) and Nestle (5.0%). Consequently, aggregate volume traded declined 15.7% to 364.5m units while value traded rose 24.2% to N6.0bn.

Broad Losses across Sector Indices
The Oil & Gas index was a lone gainer — advancing 10.2% – driven by gains in Seplat (10.2%) while all other indices within our coverage shed points. The Consumer Goods Index led losses, declining 3.9% on the backdrop of selling pressure in Nigerian Breweries (5.0%) and Nestle (5.0%); followed by the Industrial Goods index which shed 2.4% today — pressured by losses Dangote Cement (1.7%) and Wapco (3.4%). The Banking and Insurance indices declined 1.7% and 0.4% respectively.

Political Uncertainty to Continue to Douse Market Confidence
Market breadth closed negative (0.2x Advancers/Decliners ratio; 8 gainers Vs 36 losers’). At the close of trading, Seplat (10.3%), Dangote Flour (9.5%) and Vita Foam (4.9%) paced gains, while May & Baker (8.7%), Stanbic (6.8%) and NEM (6.8%) topped the market laggards. Despite the uncertainties surrounding the macroeconomic and socio-political environment, valuations of the Nigerian Market remains relatively cheap, with the Relative Strength Indicator (RSI) of the Nigerian bourse presently marginally above the support line (NSE RSI — 33.6). This presents opportunities for bargain hunting in the market. Nonetheless, we anticipate that the market will continue to experience bearish trading due to the increasing risk profile of the Nigerian market which will continue to douse investor confidence.