A global stock market crash which started on Friday is gradually spreading to the NGX as midday trading data shows a decline in the market, with MTN Nigeria being the major victim.
Data from the NGX shows that the global sell-off is also affecting the NGX, as mid-day trading data as of 12.30 pm on August 5 shows a 0.27% decline in the NGX All-Share Index, with MTN Nigeria being the major decliner.
Sell pressure on MTN Nigeria has dragged the stock to its lowest price level since October 2021, with its share price at N179 as at 12.30 pm. Its share price had declined by 5.79% at the time of this report.
Banking stocks have also suffered declines, as Wema Bank declined by 4.76%, while GTCO has lost 1% of its market capitalization.
The crash in MTN Nigeria’s stock was also exacerbated by challenges with service delivery over the past week, as the company’s dropped calls increased drastically since August 1.
Global stock market crash
Since Friday, August 2, there has been a global stock market sell-off which led to a crash in the European and Asian markets based on trading data from Monday morning.
Trading data from Asian markets show Japanese stocks crash, with the Nikkei 225 Index down by 12.40%, hitting its lowest point in 2024. The Hang Seng Index was down by 1.60%, with the Shanghai Stock Exchange Composite Index falling by 1.54% to hit its lowest since February 2024.
According to reports, Monday, August 5, has seen Japanese stock markets record their worst trading day since the “Black Monday” of 1987. Some of the heavyweight stocks in the markets have recorded huge losses. Mitsubishi crashed by over 14%, Mitsui and Co crashed by about 20%, and Sumitomo crashed by about 18%.
The Asian market selloffs was extended to European markets, with the CAC 40 (Euronext Paris), down by 2.26% on market opening, with the FTSE 100 also down by 2.08% upon market opening.
Big tech stocks have been the major casualty in this global sell-off, with pre-market data showing Microsoft down by 4.53%, Meta down by 4.92%, and Tesla down by 5.44%. Nvidia has also fallen by 20% from its all-time high price.
Reasons for the global sell-off
The sell-off was triggered on Friday, August 2, when the US Labor Department released job data figures for July showing a rise in unemployment to 4.3%, the worst since September 2021.
It is noted that the rise in unemployment was triggered by the US Federal Reserve’s decision to keep the benchmark rates, despite progressive declines in US inflation data. With rate hikes from 2022 into 2023, benchmark rates in the US have reportedly strained economic activities, thus leading to a constraint in the ability of the employers to hire more labour.
A rise in unemployment as well as unemployment benefits in the US is a signification of declining economic activities, thus the July unemployment data led to panic about a recession. On Friday, NASDAQ closed with a 2.43% decline, while the NYSE crashed with the NYSE Composite Index falling by 1.79%.
The US Federal Reserve is set to meet again in September, with analysts projecting a rate cut for the first time in two years. However, there are fears that a rate cut in September would further feed into the sentiment that the US economy is on the edge of a recession.
Potential impact on the NGX
As of June 2024, foreign participation in the NGX was about N82.2 billion (~$54.8 million), representing about 23.18%. During the month, foreign inflow was about N38.25 billion, with outflow at about N43.94 billion.
Essentially, the low level of foreign participation in the NGX almost serves as an insulation from some of the shocks that affect global markets. Hence, it is quite unsurprising that the global stock market rout has had almost no effect on the Nigerian Exchange.