The Nigerian stock exchange said farewell to the seventh month of 2019 on a sour note. The All-share index was down by 0.37% on the last trading day in July, closing at 27,718.26 points. The market closed at 29,966.87 points on the last trading day in June, meaning July saw a decline of 7.5%
There was parity among the gainers and losers with 20 each. Construction company Julius Berger was the top gainer yesterday, up 9.87% to close at N20.60. University Press PLC, publisher of Education materials, was the top loser, closing at N1.62, down 10%.
The market capitalization (value of all the stocks traded) of the exchange stands at N13.5 trillion. So far this year, the Nigerian stock exchange is down by 11.81%.
Why is the stock market doing badly?
Several reasons. One of which is investors haven't been given any reasons to be excited about the market. Much needed bold reforms from government would change that. Eliminating fuel subsidies, passing the Petroleum Industry Governance bill, and liberating electricity tariffs are prime examples.
What this means for you
If you're invested in the stock market, this performance isn't encouraging. However, don't panic and sell your stocks. You should have a long-term view i.e a time horizon that goes beyond 2019 into 2020 and the year after that. Theoretically, a long-term view of 3 to 5 years allows you to recover dips in the market. In 2017, Nigeria was one of the top 5 best performing stock markets in the world. Such is the nature of the market.
Diversity and soft landings
A diverse investment portfolio can shield you from losses in the equities market so look at the Money Market and Fixed Income space. Money market funds are securities with a maturity of a year or less. Treasury bills and Fixed deposits are examples. Fixed income securities have maturities of longer than a year. Bonds are an example.
What does August have in store for stocks?
Earnings season (where publicly traded companies on the exchange periodically release their financial statements to shareholders and the public) for the 2nd quarter is coming to an end and if July was any indication, the market wasn't moved. The outlook for August and the 3rd and 4th quarters of this year suggests the downward trend may continue.
To borrow a common Nigerian parlance, we are in "siddon look" mode.