Equities in free fall as losses hit N2.1tr on 11th day

Nigerian equities opened another week with their steepest decline so far this year as panic overwhelmed market sentiments and dampened appetite for quoted equities. With more than six losers to every gainer and large losses by several highly capitalised stocks, market value of quoted equities lost N331 billion, bringing the total loss so far this year to N2.095 trillion.

The benchmark index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI), dropped by 4.10 per cent, its highest loss so far this year. With this, average year-to-date return worsened to -21.27 per cent, implying that investors have on the average lost more than one-fifth of their portfolios within 11 trading sessions.

There was palpable tension on the trading floor and offices at the NSE as the ASI trended downward close to the 5.0 per cent stopgap for the activation of the index circuit breaker, which would have forced the authorities at the stock market to halt trading due for the first time in the 56-year history of the Exchange due to price decline.

Amidst concerns and panic about the short-term outlook for the market, authorities at the NSE at the weekend activated the market’s circuit-breaker rule, which allows the market regulator to intervene and halt trading when market declines to a certain point. The circuit breaker rule, known as “Article 170: Trading Halts Due To Extraordinary Market Volatility (Index Circuit Breaker Rule)” was earlier instituted by the NSE but its implementation was deferred. A notice by the NSE indicated that the circuit breaker rule became effective on January 15, 2016.

The circuit breaker rule stipulates that the Exchange shall halt trading in all stocks and shall not reopen for the time period specified if a 5.0 per cent move is recorded in the ASI between 10:15 a.m. and 13:45p.m on a trading day as compared with the closing value of the ASI for the immediately preceding trading day.

 Aggregate market value of all quoted equities dropped from its opening value of N8.087 trillion to close Monday at N7.756 trillion, representing a loss of N331 billion. The ASI-a common-share value-based index that tracks prices of all quoted equities, slumped to a new low at 22,550.83 points as against its opening index of 23,514.04 points.

Aggregate market value of all quoted equities had opened the year at N9.851 trillion while ASI opened the year at 28,642.25 points. The downtrend in the early days of 2016 has worsened the outlook for the Nigerian equities. Nigerian equities closed 2015 with a negative full-year average return of -17.36 per cent, nearly a notch above -16.14 per cent recorded in 2014. Approximately, this implied a loss of N1.63 trillion in 2015, in addition to a loss of N1.75 trillion recorded in 2014. Altogether, Nigerian equities had lost N3.38 trillion in the past two years, nearly a quarter of their market value of N13.226 trillion recorded at the beginning of the period.

Read also: NSE Roundup! Equities lose N1.2tr in 5 days as panic grips investors

“Sell offs in the market are expected to persist in the interim due to lack of fiscal policy direction and increasing macroeconomic headwinds as outlook for oil prices remain bearish. However, the current rout in the market presents an attractive entry point for investments with a long term investment horizon of more than two years. We suggest dividend paying stocks for investors with a long horizon while simultaneously hedging their position with an overweight fixed income exposure,” Afrinvest Securities, a Lagos-based dealer on the NSE, stated.

There were 37 losers to six gainers on Monday. All the sectoral and group indices closed in the negative, underlining the widespread selling pressure. The NSE Industrial Goods Index dropped by 7.7 per cent. The NSE Consumer Goods Index declined by 3.8 per cent. The NSE Banking Sector Index lost 1.6 per cent. The NSE Insurance Index slipped by 1.2 per cent while the NSE Oil and Gas Index lost 0.8 per cent.

Nestle Nigeria, Nigeria’s highest-priced stock, led the losers with a loss of N37 to close at N703.05. Guinness Nigeria followed with a loss of N11.10 to close at N102.89. Dangote Cement lost N9.40 to close at N123.60. Seplat Petroleum Development Company dropped by N8.84 to close at N168.12. Lafarge Africa dropped by N8.45 to close at N78.30. Nigerian Breweries lost N2.90 to close at N94. Okomu Oil Palm lost N1.63 to close at N31.01. GlaxoSmithKline Consumer Nigeria dropped by N1.34 to close at N25.74. Stanbic IBTC Holdings lost N1.31 to close at N12.23 while PZ Cussons Nigeria dropped by N1 to close at N19.08 per share.

Total turnover stood at 196.26 million shares valued at N1.67 billion in 3,254 deals. United Bank for Africa (UBA) was the most active stock with a turnover of 38.31 million shares valued at N99.94 million in 203 deals.

On the positive side, Guaranty Trust Bank led the marginal gainers with a gain of 16 kobo to close at N13.53. Continental Reinsurance and Tiger Branded Consumer Goods followed with addition of 4.0 kobo each to close at 92 kobo and 95 kobo respectively. Eterna and UBA rose by 3.0 kobo each to close at N1.50 and N2.63 while Transnational Corporation of Nigeria closed the gainers’ list with a gain of two kobo to close at N1 per share.

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