Daily Insight: Stock Market Downturn: A Classic Case of “Sell in May & Go Away”?

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In what seems to follow the trading adage; “Sell in May and go away”, the Nigerian equities market tumbled 7.7%m/m in the month of May. Ytd return slipped into the negative territory for the first time in the year, settling at -0.36% as investors dumped bellwethers such as Nigerian Breweries (-16.9%), GUARANTY (-10.0%) NESTLE (-7.9%) and ZENITH (-7.1%).

The downturn came amid sharp sell-offs observed across emerging market (EMs) equities, driven by capital flow reversal by FPIs, hammering EMs currencies. While the Nigerian naira seems to have maintained an early resilience against the dollar, relative to peers, the local equity market reported one of the largest declines, below Brazil (-10.9%), Egypt (-10.3%) and Ghana GSE (-9.2%), in May.

Although stock market sell-off appears to follow the “Sell in May and go away” trading adage, considering the sharp decline observed in May, we think the on-going volatility is linked to the events in the global space. Precisely, policy normalization in the US, amplified by increasing political and trade uncertainties in the US, EU, and China alongside the US/Korean talks, are the key concerns. At current levels, our view is that the equities market presents an opportunity for domestic players, in search of a bargain, going into June.

 

UNITED CAPITAL NIGERIA

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