Will the recent protest halt the equities market rally?
Analysts at the United Capital Plc, said the ongoing mass protest by some youth, disrupting movement and activities around major Nigerian cities may not have any impact on the growth of the nation’s equity market as the prospect of growth remains strong.
The year 2020 has been one of the most eventful years for the Global economy and more specifically, the Nigerian economy. First, the outbreak of the COVID-19 pandemic brought the Nigerian economy to a halt as the government, like other governments across the world, implemented strict lockdown measures to curb a further spread of the virus.
Accordingly, this negatively impacted the Nigerian Equities market as companies were forced to quickly readjust to the new realities. Notably, the exchange which had started out as the best performing equities market in the world at the beginning of the year, quickly sank into bear territory, reaching a historic low at the peak of lockdowns.
The equities market downfall did not last for long as government’s relaxation of lockdown measures, low-interest rate in the fixed income market coupled with resilient performance posted by corporates during the peak of lockdown in Q2-2020 and growing financial system liquidity in H2-2020 sparked a bullish run on the Nigerian Stock Exchange (NSE) with the ASI surging 23.1 percent from April till date.
While the recent social unrest and protests across the country is being closely watched by the investing public, the Stock market closed higher on Tuesday, up 0.2 percent after four straight days of profit-taking.
It must be noted that the recent rally remained driven by influx of liquidity in the system amid limited investment outlets and abnormally low yield environment.
We maintain that while the protest against police brutality may trigger some panic sales, if not de-escalated, amid recent realities in the economy which is yet to get over the devastating impact of the COVID-19 shock.
Sustained low yield environment vis-a-vis massive system liquidity which will remain the case till year-end as well as attractive dividend yields, implies that the investment case for equities remain compelling.