By Emeka Anaeto, Economy Editor

Investors in the Nigerian Stock Exchange, NSE, have fully recovered the N400 billion loss triggered by JP Morgan’s withdrawal from Nigeria announced two weeks ago, indicating a resilient domestic capacity in the market.

Trading on the exchange was positively active for three consecutive days this week, resulting in key market indicators surpassing the pre-JP Morgan high point as market capitalization hit 10.5 trillion while All Share Index, ASI, moved up to 30,543.17 as at close of business this week.

The exchange had begun recovery from several days bear run, but a day after JP Morgan announced its resolution to phase out Nigeria from its Government Bond Index, Emerging Market, GBI-EM, the market indices began to tumble with market capitalization dropping cumulatively to less than N10.1 trillion and ASI falling to 29,403.09.

Capital market analysts had expressed concern over the implication of the JP Morgan action on the equities market. 

Panic triggers
WSTC Financial Services Limited, a Lagos-based investment house, said: “We expect both warranted and unwarranted reactions from investors in the equities market. 

“We believe the sell-off in equities will be triggered by both panic reaction to the announcement, as well as more fundamental concerns which will be anchored upon elevated required return on equity, attractive returns in the fixed income market and uncertainty regarding the value of the Naira.

“We reckon that the rout in the equities market will create attractive entry opportunities for value investors and the ability to take advantage of these will depend on individual investor’s ability to filter the rhythm from the noise. 

“However, it is important to state that the fundamental concerns further depress our short term outlook on the performance of the equities market, reinforcing our recommendation for flight for safety through asset re-allocation into fixed income and currency-hedged assets.”

Awaiting FG’s policy thrust
In its own analysis Afrinvest Group, another Lagos-based investment house, said: “While we observed a knee-jerk reaction in the Nigerian capital market since the announcement, we expect this to stabilize in the medium to long term as we await policy direction from the Buhari’s administration.

“The financial market sentiment feel the impact of this news flow as the domestic investor sentiments will seem to be the new major force driving the fixed income market, while the equities market may still continue to enjoy a mix of foreign and domestic sentiments as Nigerian equities still remains in the Morgan Stanley Capital Index for frontier markets.

“The improvement in performance shows that the frantic sell offs that were observed in the market, following the JP Morgan announcement has been stemmed.”

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