Stock Market Volatility: Plunging or Repricing?

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In Jan-18, the Nigerian stock market printed a 16.0% gain, outperforming peers across the global market. However, the first week of Feb-18 has been characterized by sharp volatility with jitters in the US stock market sending shock waves across the world.

As at close of business on Tuesday, 6-Feb-18, the US S&P 500 (-6.1%), DJIA (-6.3%) and Nasdaq (-5.5%) have all tumbled MTD amid rapid sell-offs before rebounding by mid-week. A similar trend was observed in Europe and Asia where indices across markets all tanked by over 5.0% within the same period. Consequently, the Nigerian Stock index fell 1.8%MTD following three straight days of sell-offs.

Despite the recent uproar, we reiterate our view that the performance of the local equity market will stay broadly positive in 2018, albeit with intermittent volatility. While strong macro factors are anticipated to support the bullish momentum, sporadic sell-offs are also expected swing performance amid profit-taking, panic sales, and market repricing.

Accordingly, we posit that changes in market dynamics should be seen as an opportunity for strategic re-entry for the patient, alpha-seeking investors. Thus, we advise investors to cautiously take advantage of market volatility by paying attention to entry prices before placing buy orders.

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