Nigerian equities lead emerging markets’ laggards with N240bn loss

Nigerian equities started the second quarter on a negative note as sustained price depreciation placed the Nigerian market in the top bracket of backsliding emerging markets.

Global equities markets traded during the week largely on a positive note with gains across major advanced markets in America, Europe and Asia.

Many emerging markets however witnessed a slowdown, with Nigeria leading other African markets on the top list of the decliners.

Nigeria’s sovereign equities indices indicated average week-on-week decline of 1.60 per cent within the four-day trading session last week, equivalent to net capital depreciation of N240 billion. The decline pared average year-to-date return for Nigerian equities to 6.79 per cent.

Most emerging market equities were on the downside during the week, with the downtrend more pronounced within the African markets. Kenya’s NSE 20 Index indicated average decline of 0.6 per cent. Egypt’s EGX 30 Index dropped by 0.2 per cent. China’s Shanghai Composite Index declined by 1.2 per cent. Brazil’s Ibovespa Index slipped by 0.5 per cent while Hong Kong’s Hang Seng Index dropped by 0.8 per cent.

Investors however appeared to prefer the safety of global advanced markets, despite the concerns around the United States of America (USA)-China trade wrangling, Britain’s exit from the European Union and the tenuous USA-Russia diplomacy. In USA, the main indicative index- the S & P 500 Index inched up by 0.2 per cent. The tech-loaded twin indicator- NASDAQ Index however slipped by 0.1 per cent. In London, the UK FTSE All Share Index rose by 1.7 per cent. France’s CAC 40 Index posted a gain of 1.9 per cent. Germany’s XETRA DAX Index appreciated by 1.2 per cent while Japan’s Nikkei 225 Index rose by 0.5 per cent.

In other emerging markets, India’s BSE Sens Index appreciated by 2.0 per cent. Russia’s RTS Index rose by 0.4 per cent. South Africa’s FTSE All Share Index posted a gain of 0.8 per cent while Ghana’s GSE Composite Index rallied average week-on-week gain of 1.7 per cent.

The sustained depression at the Nigerian equities market underlined the shift in investors’ focus from dividend consideration to monetisation of capital gains. With significant rally in the first two months of this year, the past six weeks have seen a largely profit-taking stance by investors, mostly ignoring the strong earnings and dividend recommendations by companies.

The All Share Index (ASI)-the value-based index that tracks share prices at the Nigerian Stock Exchange (NSE), dropped from the week’s opening index of 41,504.51 points to close at 40,841.14 points. Aggregate market value of all quoted equities also declined simultaneously from the week’s opening value of N14.993 trillion to close the week at N14.753 trillion.

With nearly three decliners for every advancer, all sectoral indices at the Nigerian equities market closed the week in the red, further underlining the widespread downtrend that marked share pricing during the week.

The NSE 30 Index-which tracks the 30 most capitalised equities, recorded a week-on-week average decline of 1.48 per cent. The NSE Banking Index dropped by 1.33 per cent. The NSE Insurance Index dipped by 0.07 per cent. The NSE Consumer Goods Index dropped by 1.08 per cent. The NSE Oil and Gas Index depreciated by 2.77 per cent while the NSE Industrial Goods Index dropped by 2.09 per cent.

There were 53 decliners against 19 advancers last week compared with 40 advancers and decliners each in the previous week. Japaul Oil & Maritime Services led the decliners, in terms of percentage change, with a drop of 23.7 per cent to close at 45 kobo. Unity Bank followed with a loss of 17.2 per cent to close at N1.01. Jaiz Bank dropped by 16.05 per cent to close at 68 kobo. GlaxoSmithKline Consumer Nigeria declined by 14.7 per cent to close at N29 while Wema Bank dropped by 14.14 per cent to close at 85 kobo per share.

On the upside, Lasaco Assurance led the advancers with a gain of 21.2 per cent to close at 40 kobo. May & Baker Nigeria followed with a gain of 14.3 per cent to close at N3.20. Law Union and Rock Insurance rose by 12.3 per cent to close at 82 kobo. Unic Diversified Holdings moved up by 11.1 per cent to 20 kobo while AIICO Insurance appreciated by 9.7 per cent to close at 68 kobo per share.

Read also: NSE! Equities rebound with N46bn gain

Total turnover stood at 1.765 billion shares worth N26.562 billion in 20,265 deals last week as against a total of 2.328 billion sharesvalued at N28.927 billion traded in 25,530 deals two weeks ago.The financial services sector led the activity chart with 1.468 billion shares valued at N18.707 billion traded in 12,850 deals; thus contributing 83.18 per cent and 70.43 per cent to the total equity turnover volume and value respectively. The conglomerates sector followed with 127.882 million shares worth N623.871 million in 971 deals while the third place was occupied by consumer goods sector with a turnover of 69.868 million shares worth N6.189 billion in 2,930 deals.

The three most active stocks were Zenith International Bank Plc, Access Bank Plc and United Bank for Africa Plc, which altogether accounted for 543.758 million shares worth N9.739 billion in 3,533 deals, contributing 30.81 per cent and 36.66 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 125,282 units of Exchange Traded Products (ETPs) valued at N2.835 million executed in 11 deals, compared with a total of 15,293 units valued atN254,840 that was traded in 16 deals two weeks ago.

In the sovereign debt market, a total of 4,457 units of Federal Government Bonds valued at N4.247 million were traded last weekin 13 deals, compared with a total of 21,583 units valued at N22.868 million traded in 16 deals two weeks ago.

Most analysts said the sustained price depreciation in recent weeks has created attractive buy opportunities that may trigger a rally in the next trading sessions.

“We believe the current negative performance of the market is a correction to the bullish run witnessed in the first two months of the year. This has created attractive entry prices in large and medium cap stocks with strong fundamentals. We therefore maintain our positive outlook on the market in the near term following the release of strong full-year 2017 earnings and expectation of impressive first quarter 2018 results,” Afrinvest Securities stated.

With the Central Bank of Nigeria (CBN) voting to retain its policy rates last week, analysts at Afrinvest Securities noted that expected gradual decline in fixed-income yields will make equities to be more attractive.

Analysts at Cordros Capital also expressed the same sentiment, noting that still-positive macroeconomic fundamentals, downtrend in yields on debt instruments, and lower stock prices, will combine to drive bargain hunting ahead of first quarter 2018 results.

 

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