The Nigeria All Share Index (ASI) returned a negative 40.21 percent for investors since December 2015 till date to figure as the second worst performing index after Venezuela’s Stock Market Index, which cost stock investors 41.4 percent of their investments.
Data compiled by Bloomberg indicate that apart from the Nigerian Stock Exchange, the Lusaka Exchange and the Ghana Stock Exchange are among the worst performing exchanges to date.
While the Lusaka Stock Exchange Index returned a negative 15.78 percent to emerge the seventh worst performer, Ghana’s GSE Composite returned negative 15.54 percent to trail Lusaka in the eight worst performer position.
The Maltese Exchange, MSE top 20, performed ahead of Nigeria but returned a negative 24.54 percent as the third worst performing stock exchange in the world. The Saudi Arabia Stock Exchange, the TADAWUL All Share Index returned minus 20.86 percent as the fourth worst performing exchange.
Other poor performing exchanges are: FTSE MIB Index of Italy, -20.21 percent; Shanghai SE Composite of China, -16.74 percent; Laos Composite Index -14.68 percent; and the PSI 20 Index of Lisbon Portugal, -11.89 percent.
According to the Bloomberg compilation, only one African exchange, the Namibia Overall Index, is among the best performing exchanges for returning 30.61 percent to investors within the reference period.
The best performing exchange with 82.08 percent return to investors since December is the Brazil IBOVESPA index followed by S&P/BVL PeruGeneral TRPN Index of Peru with a return of 53.45 percent which is closely followed by Kazakhstan Kase Stock Exchange with return of 48.02 percent.
Other exchanges on the best performing category are: Russian RTS Index, 30.37 percent return; Argentina Merval Index, 30.16 percent; Colombia COLCAP Index, 27.86 percent; Jakarta Composite Index, 25.92 percent; Budapest Stock Exchange Index, 24.68 percent; and Karachi 100 Index of Pakistan which posted return of 24.54 percent.
“The dismal performance of the Nigerian Stock Exchange is due to the prevalent weak macroeconomic environment. Of particular note is the issue of forex scarcity”, said Sewa Wusu in a Whatsapp message.
Wusu, who is Head of Research and Advisory at SCM Capital said, “The FX scarcity prevented foreign portfolio investors who are major players in the Nigerian bourse from participating in the market. Besides, the contractionary monetary policy adopted by the CBN also impacted on the market.”
Investors, he said, migrated to the lower end of the yield curve where it is less risky.
“Most investors switched to the fixed income market particularly bonds and treasury bills”.
Leo Ukpong, Professor of Financial Economics at the University of Uyo, says, “The reasons for the poor performance of our market (NSE All Share Index) are very obvious. In summary, poor economic planning, lack of capacity to produce and meet our domestic demands, inconsistent foreign exchange policy, ongoing militancy around the country, and unstable political climate, among others. Put together, it encourages bearish activities and capital flights from our money/capital markets. Lastly, by this time of the year (last quarter) portfolio managers start off-loading poor performing assets from their portfolios. This in effect will amplify the situation in poor performing markets.”
He recommends that “as a nation, we have quite a lot of challenges ahead of us to tackle before we can steer our economy back on the right track”.
Nigeria and Venezuela had spreads on their Credit Default Swaps (CDS) dropping as of June after devaluing their national currencies as falling oil prices cut the main source of government revenues and export earnings, coupled with rising inflation and recession. But while the spreads on Venezuela’s bonds continue to drop, that of Nigeria is trending northwards.
As of October 14, Nigeria’s CDS spread had risen to 599.155 basis points from 581.5051 basis points achieved on July 22, one month after devaluation. Spreads were 681.313 basis points in May. Venezuela, however, saw drops of 2,552.2849 basis points to 3,312.7473 basis points on October 14 compared to 5,865.0322 basis points in May.
Currency challenges in both markets have cascaded into other markets. Data from www.tradingeconomics.com indicate that 10-year Nigerian bond yields fell to 15.04 percent on Thursday, October 13 from 15.15 in the previous trading. The currency is Africa’s worst performer having lost more than 35.7 percent against the dollar in the last six months, according to data compiled by Bloomberg.
Yields on the Venezuela government 10-year bond were 10.57 percent on Thursday, October 13 and the IBVC index 11.95% during the last month and +12.76% during last year.