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NSE LIVE! Inflation-adjusted return worsens to -23.32%

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For an average investor that had bought shares on the Nigerian stock market at the onset of this year, his real loss now runs in double digit as both actual decline in portfolio value and the economical decline in general value of money combine to keep the average investor with a wrinkled face.

Early third-quarter earnings reports and the prospective formation of the Federal Executive Council with the clearance of the first batch of ministerial nominees by the Senate failed to lift equities last week. Nigerian stocks recorded one of the worst performances in the global stock markets last week, with average week-on-week decline of 1.10 per cent, the third poorest performance within tracked emerging and advanced markets.

The decline at the Nigerian stock market, equivalent to about N114 billion or about $573 million, was compounded by the announcement of another rise in inflation rate by the National Bureau of Statistics (NBS). NBS’s latest inflation figure showed that inflation rate rose from 9.3 per cent in August to 9.4 per cent in September, its eighth increase in the past nine months and the highest figure in 31 months.

The benchmark index for the Nigerian stock market, the All Share Index (ASI)- a value-based common index that tracks prices of all quoted equities at the Nigerian Stock Exchange (NSE), closed the week below its psychological base of 30,000 points at 29,834.21 points compared with the week’s index on board of 30,165.22 points.

Underlining the correlation between the benchmark index and market value, aggregate market value of all quoted equities also dropped from its week’s opening value of N10.367 trillion to close at N10.253 trillion, representing a loss of N114 billion or 1.10 per cent. With 39 decliners to 29 advancers, the negative market position was driven by widespread losses as well as losses recorded by highly capitalised stocks. A total of 122 equities closed flat, highlighting the lack of activities in several stocks, most of which have stagnated at nominal prices for more than 12 months.

The negative return further built up the negative average year-to-date return at the stock market to -13.92 per cent. With inflation rate at 9.4 per cent, inflation-adjusted return closed the week at -23.32 per cent.

“At 9.4 per cent, headline inflation rate has moved further away from the 6.0 per cent – 9.0 per cent target band of the Central Bank of Nigeria (CBN) while also inching closer to the double digit mark. The rising price level stems from the recent weakening macroeconomic fundamentals around foreign exchange prices which have had debilitating impact on the cost of production and prices of goods and services,” FSDH Securities, a Lagos-based stockbroking firm, stated in what expressed the worry of the investing public.

FSDH noted that while the CBN might still be committed to stabilizing aggregate price level in the economy through its monetary policy tools, the macroeconomic ambience suggests that the apex bank may not be able to employ a major tool to curtail mounting pressure on prices in the near term.

According to FSDH, the slowing Gross Domestic Products (GDP) growth coupled with the rising inflation, a situation which best describes the economy as being in a period of stagflation, places the monetary authority in a situation of dilemma in using a major policy tool such as Monetary Policy Rate (MPR) in addressing price and output concerns.

Analysts said investors may increasingly begin to price the rising inflation into market values of securities within the context of real return which is gradually diminishing on a successive month basis as inflation trended upward from 8.2 per cent in January to 9.4 per cent in September 2015.

Global stock analysis showed that Nigerian equities were within the lowest bracket of the global stock markets last week. The twin benchmarks for the United States of America, the NASDAQ and S&P 500 gained 0.9 per cent and 0.7 per cent. In Europe, the Russian RTS, Germany DAX and France CAC 40 rose by 0.3 per cent, 0.1 per cent and three basis points respectively.  The China Shanghai Comp returned 6.5 per cent while the India BSE Sens added 0.5 per cent. Within the African region, the Egypt EGX 30 recorded the highest gain of 3.3 per cent. It was followed by the Ghana GSE which rose by 0.2 per cent.

On the negative side, Brazil Bovespa index recorded the highest loss of 4.7 per cent among the tracked markets. South Africa JSE fell by 0.7 per cent. Japan Nikkei dropped by 0.8 per cent. Kenya’s Nairobi Stock Exchange 20 dropped by 2.9 per cent while United Kingdom’s FTSE declined by 0.7 per cent.

At the Nigerian stock market, turnover fell below recent weekly average as investors maintained a tight trading position. Total turnover stood at 949.68 million shares worth N10.28 billion in 14,833 deals last week as against a total of 1.39 billion shares valued at N12.17 billion traded in 14,821 deals two weeks ago. Financial services sector remained the most active with a turnover of 577.298 million shares valued at N4.87 billion in 8,006 deals, representing 60.79 per cent and 47.41 per cent of the total equity turnover volume and value respectively.

The trio of Capital Oil Plc, United Bank for Africa Plc and Guaranty Trust Bank Plc were the three most active stocks with a joint turnover of 370.170 million shares worth N2.386 billion in 2,042 deals, representing 38.98 per cent and 23.21 per cent of the total equity turnover volume and value respectively.

However, banking, insurance and oil and gas stocks were the contrarian stocks last week as good earnings report by the United Bank for Africa (UBA) highlighted possible strong recovery in the financial services sector. The NSE Oil and Gas Index recorded the highest gain of 3.75 per cent, riding on the back of strong gain by Forte Oil, which tempered third-quarter earnings failed to halt rising demand. The NSE Insurance Index rose by 2.81 per cent while the NSE Banking Index returned modest gain of 0.67 per cent during the week.

All other group indices followed the negative overall market position. The NSE Premium Index, which tracks the trio of Dangote Cement, FBN Holdings and Zenith Bank International, recorded the highest loss of 2.09 per cent. The NSE 30 Index, which tracks the 30 most capitalised companies on the NSE, declined by 0.90 per cent. Both the NSE Premium Index and NSE 30 Index substantially influenced the negative close of the market, with the two indices mirroring more than three-quarters of the total market capitalisation. The NSE Main-Board Index dropped by 0.57 per cent. The NSE Consumer Goods Index declined by 1.73 per cent. The NSE Industrial Goods Index lost 1.45 per cent. The NSE Pension Index, which tracks a group of 40 stocks adjudged suitable for pension investments, dropped by 0.45 per cent while the NSE Lotus Islamic Index, which tracks stocks that comply with Islamic investment guidelines, returned -0.42 per cent last week.

Transcorp Hotels, which reported negative third quarter earnings, led the losers, dropping by 9.58 per cent to close at N6.42. Access Bank trailed with a drop of 9.23 per cent to close at N4.72. Learn Africa declined by 8.70 per cent to 84 kobo. Unity Bank dropped by 7.41 per cent to close at N1.50 while Honeywell Flour Mills lost 7.27 per cent to close at N2.55 per share.

On the upside, Okomu Oil Palm recorded the highest gain, in percentage terms, of 24.32 per cent to close at N35.63. Nascon Allied Industries followed with a gain of 10.90 per cent to close at N7.73. AXAMansard Insurance rallied 10.74 per cent to close at N2.68. Forte Oil rose by 9.81 per cent to close at N280 while Zenith Bank International grew by 7.42 per cent to close at N17.51.

On the non-common equity market, a total of 3,740 units of Exchange Traded Products (ETPs) valued at N2.035 million were traded in 19 deals compared with a total of 3,180 units valued at N1.150 million traded in 18 deals two weeks ago. Also, a deal was struck for 1,000 units of Federal Government Bonds valued at N1.165 million last week as against two deals struck for a total of 29,472 units valued at N30.711 million in the previous week.

Analysts expected the market to gain some traction from third quarter earnings. Several companies are expected to undertake final review and board approval of their third-quarter earnings this week. Approved earnings reports must be released immediately to the NSE for onward dissemination to the investing public, according to extant listing rules at the Exchange.

 

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