A considerable slowdown in global demand for equities, especially emerging and frontier stocks, and concerns over the imminent policy decisions of the Central Bank of Nigeria (CBN), set a background for a negative performance for the Nigerian equities market in the immediate past week.
Benchmark indices at the Nigerian Stock Exchange (NSE) indicated a week-on-week decline of 1.12 per cent, equivalent to net capital depreciation of N143.9 billion for the five-day trading week. The downtrend depressed the average year-to-date return for Nigerian equities to 36.57 per cent.
The Monetary Policy Committee (MPC) of the Central Bank Nigeria (CBN) is scheduled to meet between Monday November 20 and Tuesday November 21, 2017. The meeting, the last one for this year, is expected to review the apex bank’s monetary policy tools and rates against the background of macroeconomic and global developments since the last meeting.
Anxieties that the MPC may spring surprises by cutting rates or it may play traditionally to popular analysts’ position by retaining rates at current levels were part of the pricing dynamics at the stock market during the week.
The All Share Index (ASI)-the common value-based index that tracks share prices at the stock market closed the week at 36,703.58 points as against its week’s opening index of 37,120.28 points. With more than two decliners for every advancer, aggregate market value of all quoted equities declined from the week’s opening value of N12.847 trillion to close at N12.774 trillion.
While the face value of the market value indicated a drop of N73 billion, the actual decline was about N144 billion based on the more reflective determinant-the ASI. The difference between the ASI and aggregate market value was due to the listing of new shares by Unilever Nigeria and Trans-Nationwide Express.
The performance of the Nigerian equities market mirrored, to a large extent, the downtrend in the global equities markets. In the emerging markets of Africa, it was a largely bearish week. Besides Nigeria, the Egypt EGX 30 Index slumped by 3.5 per cent while the Kenyan NSE ASI dropped by 0.2 per cent. However, Ghana’s GSE Composite Index rallied a gain of 4.7 per cent while South Africa’s FTSE/ JSE Index inched up by 0.6 per cent.
In the developed markets, United Kingdom’s FTSE ASI dropped by 0.8 per cent. Germany’s XETRA DAX Index declined by 0.6 per cent. France’s CAC 40 Index dipped by 0.9 per cent. Japan’s Nikkei Index dropped by 1.3 per cent. China’s Shanghai Composite Index declined by 1.4 per cent while Russia’s RTS Index declined by 2.1 per cent.
On the positive side, many advanced and emerging markets closed on the upside. United States of America (USA)’s lead index, S & P 500 closed flat while its twin index- the US NASDAQ- appreciated by 0.5 per cent. Hong Kong’s Hang Seng Index rose by 0.3 per cent. Brazil’s IBOVESPA Index rose by 1.0 per cent while India’s BSE SENS inched up by 0.1 per cent.
Further analysis showed a market-wide decline at the Nigerian stock market with all sectoral indices in the red with the exception of the NSE Oil and Gas Index, which appreciated by 0.85 per cent. The NSE 30 Index, which tracks the 30 most capitalised stocks at the NSE, recorded a week-on-week decline of 1.37 per cent. The NSE Consumer Goods Index recorded the highest loss of 2.89 per cent. The NSE Banking Index depreciated by 1.29 per cent. The NSE Insurance Index dipped by 1.98 per cent while the NSE Industrial Goods Index declined by 1.03 per cent.
There were 20 advancers against 43 decliners during the week as against 30 advancers and 29 decliners recorded in the previous week. Caverton Offshore Support Group recorded the highest loss of 21.4 per cent to close at N1.32. Linkage Assurance dropped by 17.7 per cent to close at 56 kobo. C & I Leasing declined by 13.8 per cent to close at N1.44 per share. University Press lost 10.92 per cent to close at N2.53 while Eterna dropped by 10.48 per cent to close at N3.76 per share.
On the positive side, AG Leventis Nigeria recorded the highest gain, in percentage terms, of 27.3 per cent to close at 70 kobo. Forte Oil followed with a gain of 10.3 per cent to close at N48.62. BOC Gases rose by 9.9 per cent to close at N4.56 per share. Red Star Express gathered 5.0 per cent to close at N5.04 while Pharma-Deko rose by 4.89 per cent to close at N2.36 per share.
Major deals struck on Dangote Cement and Nigerian Breweries lifted the volume and value of activities at the stock market. Total turnover stood at 2.80 billion shares worth N54.78 billion in 17,792 deals last week as against a total of 1.32 billion shares valued at N13.78 billion traded in 19,169 deals two weeks ago. Financial services sector remained atop activity chart with 2.352 billion shares valued at N8.995 billion traded in 9,364 deals; thus contributing 83.88 per cent and 16.42 per cent to the total equity turnover volume and value respectively. The consumer goods sector followed with 178.982 million shares worth N16.849 billion in 4,297 deals while the third place was occupied by industrial goods sector with a turnover of 140.570 million shares worth N27.848 billion in 794 deals.
The three most active stocks were Sovereign Trust Insurance Plc, FBN Holdings Plc and Dangote Cement Plc, which altogether accounted for 1.917 billion shares worth N29.875 billion in 2,130 deals, contributing 68.37 per cent and 54.54 per cent to the total equity turnover volume and value respectively.
In the sovereign debt market, a total of 5,950 units of Federal Government Bonds valued at N6.247 million were traded in two deals, compared with a total of 2,806 units valued at N2.623 million traded in 16 deals penultimate week.
As the apex bank begins its meeting on Monday November 20, many analysts expect the CBN to retain its rates. Thus the Monetary Policy Rate is expected to remain at 14.0 per cent; Cash Reserve Ratio (CRR), 22.5 per cent; Liquidity Ratio, 30.0 per cent; and the asymmetric corridor around the MPR at +200 and -500 basis points.
“Despite the noticeable easing of external sector pressures and improving growth prospect, we believe that in line with outcomes of previous meetings held this year, the MPC would retain rates at current level, owing to the fragility of the economic recovery and disappointing inflation numbers witnessed so far in third quarter 2017,” Afrinvest Securities stated.
Analysts said they expected the decline recorded in the previous week to stimulate bargain-hunting for value stocks in the new week, although any surprise decision by the apex bank may alter the pricing dynamics at the Exchange.
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