Despite an increase in the volume and value of stocks traded on the Nigerian Stock Exchange on Monday, the All-Share Index dropped 2.2 percent as investors lost ₦259.2 billion.
The bearish performance means the NSE’s Year-to-Date return worsened to more than -19 percent and investor sentiment, measured by market breadth, weakened further. The negative trend will most likely continue for the foreseeable future, analysts have said, as the coronavirus pandemic shows no sign of slowing down.
“We expect the bearish trend to persist as the pandemic continues,” said analysts at Afrinvest Research, reacting to the development in Nigeria’s stock market. The trend, however, is a global one. So far in 2020, the Johannesburg Stock Exchange has fallen by about 29 percent and worldwide, the equities market alone has lost $24 trillion in value – more than the $22 trillion in United States GDP – since the COVID-19 broke out late December, data from the Bank of America shows.
In the past month, the U.S. stock market has crashed faster than both the Great Depression and Black Monday, and in terms of the total drawdown, the 2020 crash is now worse than 1929 and is fast approaching 1987, BofA CIO Michael Hartnett says.
In addition to shaving off almost a third of the market capitalization of global equities markets, the pandemic has triggered panic across the world and unsettled investor confidence, as many multinationals began to review their financial projections downward. Commodities and money markets have also been hit by the outbreak, coupled with the oil price war between Saudi Arabia and Russia, which has spread the uncertainty across other assets.
The damage the contagion has inflicted on the global equity market, and the world economy at large, have lasted for more than three months. But there is no end in sight yet with the World Health Organization admitting yesterday the new coronavirus pandemic is clearly “accelerating” while the International Monetary Fund, global organizations and top chief executives have sounded warnings of an unavoidable global recession.
This year could see a severe recession “at least as bad during the global financial crisis (2008/2009) or worse,’’ IMF Managing Director Kristalina Georgieva said after a phone call of G20 finance ministers and central bank governors on Monday. Earlier on, BofA had declared that the world was facing a coronavirus-induced recession while the Organization for Economic Cooperation and Development estimates that the outbreak could cut global economic growth in half, or worse.
The current outbreak is “very different from all previous crises” and the world economy can expect to see a “deep recession,” said Keith Skeoch, CEO of Standard Life Aberdeen, a UK-based global investment management company, in an interview with CNBC. To Anthony Scaramucci, the coronavirus pandemic is “literally 9/11 plus the global financial crisis,” says the Skybridge Capital founder and former White House communications chief, while adding that the crisis is “here to stay for a while.”
While conditions are now improving in China, the epicenter of the outbreak, the pandemic is leading to lockdowns in the Western world, Iran, and parts of Africa, and in the process disrupting trade, increasing debt vulnerabilities and limiting the scope for monetary policy maneuvers.
But economic recovery would be expected in 2021 according to the IMF, especially with the improvement in China, which accounted for 19.3 percent of the world economy in 2019. “The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be,” Georgieva adds. While experts suggest the degree of the economic recovery of sovereign states and multinationals will vary.
Amid the pandemic and its worldwide implications, the global economy is expected to grow by 2.4 percent in 2020 down from the 2.9 percent projected earlier, OECD said in a report.
