NSE LIVE! Equities lose N138b as macro uncertainties persist

Nigerian equities continued on the downtrend last week with sustained depreciation in shares prices amidst concerns over delay in expected key government appointments and macroeconomic pronouncements. As in the previous week, quoted equities dropped in four consecutive trading sessions out of the five trading sessions last week. At the end of the week, quoted equities had lost 1.22 per cent, equivalent to about N138 billion.

Aggregate market value of all quoted companies on the Nigerian Stock Exchange (NSE) dwindled to N11.215 trillion at the weekend as against its week’s opening value of N11.353 trillion, representing a loss of N138 billion. The All Share Index (ASI), the benchmark index that tracks prices of all quoted equities, depreciated from the week’s opening index of 33,257.90 points to close at 32,853.49 points, representing a week-on-week decline of 1.22 per cent.

The decline last week further depressed investors’ returns, raising the sustaining negative average year-to-date return to -5.20 per cent. The downtrend underscored a pervasive selling pressure as investors remained edgy and uncertain about the macroeconomic direction of the government. Price analysis showed more equities were losing while the number of advancers were dropping, a trend consistent with a buyer’s market under which preponderance of supply to demand drives share prices downward towards the buyers’ prices, usually lower prices. There were 22 gainers last week against 54 losers, worse than 28 gainers against 46 losers recorded in the previous week. Majority of quoted equities at the NSE remained stagnant, mostly at their nominal or lowest value. A total of 117 stocks were unchanged last week as against 119 stocks in the previous week.

Total turnover increased to 1.44 billion shares worth N26.41 billion in 18,110 deals last week as against a total of 1.28 billion shares valued at N31.3 billion that were traded in 19,143 deals in the previous week. The banking sector-led financial services industry remained the fulcrum of activities at the stock market, accounting for 919.07 million shares valued at N8.39 billion in 10,033 deals; representing 63.89 % and 31.76 % of the total equity turnover volume and value respectively. Transactions on Julius Berger Nigeria, whose main foreign investor has started a divestment process, pushed the construction and real estate sector to the second position on the activity chart with 187.94 million shares worth N9.46 billion in 274 deals. Consumer goods sector placed third with a turnover of 143.344 million shares worth N6.003 billion in 3,031 deals. Read Here: Bilfinger disposes of N23b equity in Julius Berger

The trio of Zenith International Bank Plc, Julius Berger Nigeria Plc and Wapic Insurance Plc were the most active stocks, jointly accounting for 489.554 million shares worth N13.376 billion in 1,637 deals, contributing 34.03% and 50.66% to the total equity turnover volume and value respectively. Also traded during the week were a total of 1,945 units of Exchange Traded Products (ETPs) valued at N533,746 in 23 deals, a substantial increase on a total of 624 units valued at N235,319 traded in 20 deals in the previous week.
There were three new bond listings during the week. A total of 599.99 million units were added to the Federal Government Bond 14.20% FGN MAR 2024 while 324.5 million and 233.73 million units were added to 12.1493% FGN JUL 2034 and 15.54% FGN FEB 2020 bonds respectively.

The stock market during the week also witnessed the additional listing of a total of 68.11 million ordinary shares of 50 kobo each in the name of McNichols Consolidated Plc. The shares were as a result of the conversion of 68.11 million preference shares of 50 kobo each to ordinary shares as contained in the company’s resolution passed at the 27th June 2013 annual general meeting. The new listing brought McNichols’ total outstanding shares to 270 million ordinary shares.

The stock market remained within the grips of macroeconomic uncertainties with many analysts pointing at delay in the constitution of the President Muhammadu Buhari’s cabinet and lack of macroeconomic clarity. President Buhari was sworn in on May 29 but so far he has not made any ministerial appointment or key appointment such as the Secretary to the Government of the Federation. Buhari’s party, which has the majority in the two chambers of the National Assembly, has been bogged down by wrangling over the appointments, with all appointments so far against the decisions of the party hierarchy. Read Here: Real reasons Buhari’s ministerial list is delayed

Also, last week, the Central Bank of Nigeria (CBN) announced the restriction of importers of 41 products from accessing foreign exchange at the Nigerian Foreign Exchange market. This also followed ostensible dollar shortage in banks. The CBN cited the need to conserve foreign reserves, facilitate the resuscitation of domestic industries and improve employment generation as reasons for the latest restrictions.
Many analysts said the situation, whichever way, remained precarious for Nigeria. Analysts at Afrinvest Securities said structural weaknesses and infrastructural constraints which strain competitive local production and the rigorous discipline and tight border control needed to implement import substitute strategies could mitigate the apex bank’s objective of domestic industries growth and employment generation. Besides, the move may unintentionally limit fiscal revenue expansion sources of the Federal Government needed to fund budget deficit particularly from custom duties. Read Also: No more forex for rice, private jets -CBN

Analysts saw the move as a dodgy devaluation of Naira noting that while the pressure at the interbank foreign exchange market is expected to ease, the transferred effect will become visible at the unofficial market, and the spread between foreign exchange rate at the interbank and bureau de change and street market will widen markedly. This may further pressure inflation rate and banks’ trading income due to further reduction of interbank liquidity. Reduction in banks’ income could adversely affect the stock market, where banks are the dominant players and trend setters.

“Lower exchange rate will pressure the earnings of consumer goods companies and also reduce the income of the banks. Hence, the equities market may likely react negatively to the news in the coming week,” Afrinvest Securities stated.
“Expectedly, foreign investors who may have shown interest in playing in the Nigerian market after the successful general elections and a peaceful handover may be held back on concerns over exchange rate dynamics in Nigeria,” Afrinvest Securities added.

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