+Granted Merger: Providus and Unity Bank
Global Market Sellouts: Nigerian Reasons
Global stock markets experienced one of its heaviest shocks on the 5th of August, 2024, with Asia leading the downturn.
The Japanese stock suffered its biggest losses in 37 years, with the Nikkei 225 Index plunging by 12.4%. The Nasdaq composite fell over 6%, S&P fell by 4.25%, the Dow fell by more than 1000 points, while the London FTSE 100 fell by more than 1.5%.
Analysts blamed the losses on the fears of a US recession, caution over the AI hype, and geopolitical tensions in the Middle East.
Although the Nigeria Stock Exchange experienced a loss within that time period, trend data shows that this may be unrelated to the losses in the Global market.
The All Share Index (ASI) in the Nigerian Stock Market has been on the decline since the announcement of the new interest rate on the 25th of July, well before the 5th of August when the global stock turbulence began.
The ASI had fallen by 2,574.55 between the 25th of July and 5th of August. It was 100,156.96 on the 25th of July and fell to 97,582.41 on the 5th of August.
The global influence on the decline in Nigeria’s stock index may be minimal also because foreign participation in the NGX is 23% compared to 77% of domestic participation in the Nigerian Stock Market as of June, 2024.
Also, foreign investment in the Nigerian Market declined in June, though it is still higher than the foreign investment in January 2024.
Foreign investment in the Nigerian market peaked in May, but declined by 33.87% in June. It rose to N124.28 billion in May and declined to N82.19 billion in June.
One fear that triggered the massive sell out was that investors believed major technology companies, especially those investing in artificial intelligence (AI), had overvalued their shares and were now undergoing a correction.
Out of the 119 listed equities taking part in trading on the NGX, there are only 6 technology companies.
Unlike the Global Market where AI/technology companies are among the top valuable companies, the technology companies listed on the Nigeria Stock Market are not among the top valuable companies.