16 February 2015, Lagos – The present market sentiment which is expected to be sustained in the first half of the year does not support any market listing or an Initial Public Offer, IPO, in 2015, experts at United Capital Plc have said. This is contained in their end of year review titled, “Nigerian Economy and Financial Markets, 2014 Review and 2015 Outlook: ‘Tales of Two Halves’.
Already, the stock market started the year on a negative footing and has been down for most part of the year. Resultantly, the market capitalization of all listed equities dropped by 16.6 percent in just one month, closing at N9.847 trillion as at the close of business on Friday, January 30, 2014, from N11.478 trillion at the end of transactions on December 31, 2014.
They noted that: “Following the twin stellar performance of the equities market in 2012 and 2013, the market saw two major listings in 2014 by Seplat Petroleum Development Company Plc and Caverton Offshore Support Group in April and May respectively. The dual listing of Seplat on the Nigerian Stock Exchange, NSE, and the London Stock Exchange, LSE, in April 2014 marked the first IPO on the NSE since the market crash in 2008.
“Seplat listed its shares on the main board at N576.0 (£2.10) per share, making it the first upstream oil and gas company listed on the NSE. Following this, Caverton listed its 3.35 billion shares at N9.30 per share, adding N32 billion to the total market capitalization of the exchange.” They however stated, “Though we expect to see capital raising exercise by listed companies, a public offer is not expected.”
They further observed that the equities market in 2015 would be shaped by key global and domestic factors, ranging from interest rate hike in the US and UK, falling oil prices, exchange rate instability and possibility of further devaluation of the Naira.
Others include the effect of falling oil prices on government finance, expenditure and consumption and the ripple effect on company’s earnings, effect of the CBN’s tightening stance on banks’ performance and earnings, pass-through effects of devaluation of cost of imports and inflation, bearish sentiment, as well as attractive pricing and dividend yield. They noted that given the dominance of foreign investors in the equities market, the impact of a capital flight from frontier and emerging markets on the back of interest rate hike in the US and UK will have a significant impact on the market.
“The benchmark rate which have been at a low of 0.25% since 2009 coupled with liquidity boost from quantitative easing drove capital flows into emerging and frontier markets. A hike in interest rate by the US Fed coupled with impressive numbers in the US which could lead to a better performing US equities market would lead to capital flight and also reduce inflow into Nigerian equities,” they said in the report.