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How social unrest impacted investors’ perception in the equities market

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Stock market
Stock Market

By Babajide Komolafe

All over the country, affected businesses count their losses in the aftermath of EndSars. As expected, investors would factor in the impact of the protest on company and industry-specific basis.  For the equities market, a quick comparison points out that the effects have been neutral with only a negative impact on activity level surfacing as the unrest gained steam.

“Equities market maintained positive performance as investors ignored the violence and unrest in the country and positioned ahead of the release of 3rd quarter earnings. This is greatly reinforced by the current unappealing fixed income yield that push investors to jack up their risk appetite.

Following the bullish trend at the beginning of the month, the ASI advanced by 4.1% in the week prior to the protest. This sentiment was extended to the first week of the protest but at a slower pace as the market gained 0.86% in the first week and 0.14%”, stated Peter Elege, Managing Director of PFI Capital, a financial advisory company, based in Lagos.

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However, as the protests intensified, a decline in market activity level was recorded. The volume of activity declined by 38% from 3.12 million down to 1.95 million while the value of stock traded also declined by 35% from 35bn to 22bn. Elege explained.

“Similarly, in the second week, level of activities waned further with volume declining by 14% to 1.5m while value also declined by 23% as N19.7bn worth of stocks was traded compared to the 35bn traded in the week prior to the protest,” he said.

Investors’ sentiment measured by market breadth also reduced during the review period. From 4.1x in the week prior to the protest, investor’s sentiment waned to 1.8x during the first week and further deteriorated to 0.8x during the week the social unrest reached its peak.

The nationwide protest raised concerns about whether local and foreign portfolio investors would move funds out of the economy.

The performance in the week of all-round protest, however, showed the resilience of investors to take position ahead of the release of 3rd quarter earnings while being discouraged from the fixed income market due to unattractive yield.

VANGUARD

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