Another Bloody Day

It was another bloody day on the Nigerian Stock Exchange (NSE). Red was splashed all over the place as 66 stocks took a plunge. Only 17 managed to close higher.

After the bloodbath of Monday and Tuesday, Wednesday offered some respite with 1.6% decline. Alas, it was short lived. Volume dipped more than 60% on Thursday and the All Share Index lost 2.3% to close at 54,908, the lowest point for the year. So far the index has lost 5.3% for the year. The loss for the week stands at a cumulative 9.1% perhaps the biggest lost in any four days for a decade. So where do we go from here?

The last year to resemble a bear was 2005 when the All Share Index only managed 1% gain for the year. Most of the destruction was done between February and early April. The All Share Index dropped to its lowest point for the year 20,661 on April 6th. By then the market was down by 13.4%.

The reversal started in late April but by the end of May, the momentum was lost. A full recovery began in July. The Index rose to 21,911 by the end of July closing with a cumulative year loss of 8.1%. The worst was over. From then onwards it was a steady climb until 4th November when an all time high 26,137 was achieved with the market returning 9.6% for the year. It was a remarkable turnaround given the bloodbath in the first quarter. However, this gain was not carried till year end as Mid November to December recorded declines to close the year almost flat with a 1% gain. So what can we learn from all this?

The worst will probably be over in the next two weeks as we approach July. We expect a lot of quarterly announcements to lift the market. Most of the panic selling would also have subsided and cooler heads will begin to take control.

For the strong, there are some good opportunities in the market at the moment. For the cautious I will advice a wait and see attitude for at least one more week.

I am looking forward to July. It can't come sooner.