As Nigerian shares hits 15-year excessive, experts urge traders to not purchase the highest
On Tuesday, the All Share Index (ASI) of the Nigerian Stock Exchange hit a 15-year excessive. The ASI rose by 0.51% to shut yesterday’s buying and selling at 66,490.34 foundation factors, rising above the excessive of 66,371.20 bps recorded on March 5, 2008. While different traders could also be seeking to get in on this run, experts have warned towards getting their fingers burnt.
Samuel Oyekanmi, a analysis analyst, informed traders to be a bit skeptical of the market movements. “When there is a bubble and the market is so bullish, you need to be skeptical before you go in. It is best you have been in before it goes up. Right now, it is already at a record high, you don’t want to go in and it bursts,” he informed TechCabal.
Is the rally disconnected from Nigeria’s economic system?
Most of the experts consider the market would stay bullish because the ASI on Tuesday was pushed by banking and shopper items. Notwithstanding, two different experts consider that the market is disconnected from the broader economic system. CEO of Asher Investment, Muktar Mohammed mentioned that whereas the stock trade is doing properly, it will in some unspecified time in the future bow to the true state of the nation’s economic system. Mohammed mentioned that markets rely upon the success of the economic system to thrive. “As a market, you need the economy to be very stable, especially the macro economic space,” he mentioned.
Mayowa Badejo, a associate at 213 Capital Ltd, agreed with Mohammed as he warned traders to not be fast to start to put money into the stock market. At core of his submission is the truth that the stock market rally doesn’t not replicate among the financial realities Nigeria is going through. As it stands right this moment, Nigeria’s inflation is at 24%
, with the hole between the naira and greenback fee widening within the black market. Also, the Gross Domestic Product slowed to 2.51% in Q2 2023 from 3.54% in the identical quarter final yr over difficult financial circumstances. “There are a lot of foreign investors trapped in the Nigeria market due to forex scarcity. They may want to get out. One has to be careful and investors should not rush into it. In my own view, this rally is not sustainable. The fundamentals like our GDP growth is very low, which is not enough. If you consider our inflation, exchange rate devaluation, fx reserve and other fundamentals, it does not support the rally we are seeing,” Badejo mentioned.
A brand new shift to the cash market
While market experts admit that the swear-in ceremony of ministers and efficiency of home traders contributed to the market rally; Badejo senses a shift in funding. The analyst mentioned that there’s a risk of traders gravitating to the cash market. Since there are decrease dangers within the cash market than within the fairness market.
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…. to be continued
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