Wednesday, December 17, 2014 11:14 AM / Research
Yesterday, Nigerian stocks plunged by –2.30% to return to 29,000bpts range, recording a new 52weeks low after breaking its 24months support level at 30,093.83 recorded on January 16th 2013. Technically, the bear market mode has fully activated as market has really gone far below 20% correction threshold.
Those who have strictly taken to our advice and suggestions in our previous reports would have been well positioned against the envisaged sell-off trend, in which every technical indicators still suggest more downtrend in the coming sessions, for those who have not read the report, follow this link
To recall, we have categorically suggested in our previous reports to retail investors, particularly our subscribers to hold their cash outside equity market for now or better still draw up a long term investment approach. The recent plunge in the market net worth to N9trillion, further confirms that investors’ apathy towards investment in equities are on the high-side- to this regard, here are few take-away
Investors’ Apathy towards investment in equities just hits new High
More than half of the gains recorded in 2013 have been erased with current downtrend. The YTD loss is currently stands at -27.97% against +47.19% gain recorded in 2013. To this regard, the current trend should not be treated as correction anymore; the trend has switched to bear market, where panic selling would begin to dictate the pace very soon. This further means more sell-off would hit the market and the blue chips are likely to be the worst hit.
Is it the right time for long term investors to accumulate?
To answer this question, I would say ‘NO’. In a bear market no strategy actually works, the best your strategy can do for you would be only to reduce your losses. This further points to the fact that no one knows how deep this market can go due to high level of uncertainty in the current socio-political-economic atmosphere, which is not good for equity market. Those who consider this as a buying opportunity, should be more cautious and wait for the bottom as the panic selling may gain tempo soon.
Nigerian market on a global chart
With the growing active sell-off in the week, the net worth of the Nigerian Stock Market has depleted by N3.4trillion so far in the year, which has put NSE-ASI on the bottom of the performance table both on the global level and also within the African region. This may continue to put our market in bad or unattractive shape for fund managers who patronize the Nigerian market regularly. This may consequently stretch the downtrend beyond expectation while the unfavourable outcome of the election may as well delay the recovery.
What should retail investors do?
Analysis has revealed recently that average blue chips on the Nigerian bourse is actually trading at its 2yrs low, with significant tendency to trade further below this threshold. This trend/pattern would only benefit those investors who are long term oriented and those who are about to engage in active accumulation. For retail investors, you should stay at the gate and ready to take position as soon as sell pressure begins to wane.