Nigerian equities recorded their best performance so far this year last week as resurgence in bargain-hunting and increased demand for quoted equities halted the year-running recession at the stock market.
With improved momentum of activities, quoted equities ended the week with a week-on-week gain of N107 billion, representing a weekly average gain of 1.33 per cent. The gain, though modest, helped to reduce the negative average year-to-date return to -16.81 per cent.
Aggregate market capitalisation of quoted equities at the Nigerian Stock Exchange (NSE) increased to N8.194 trillion as against the week’s opening value of N8.087 trillion. The All Share Index (ASI)-the common value-based index that tracks prices of all quoted equities, also recovered to close at 23,826.50 points compared with its week’s opening index of 23,514.04 points.
A turnover of 2.177 billion shares worth N10.753 billion in 21,471 deals were traded during the week by investors on the floor of the Exchange in contrast to a total of 1.459 billion shares valued at N14.165 billion that exchanged hands in 15,164 deals in the previous week.
The financial services industry led the activity chart with 1.906 billion shares valued at N6.132 billion traded in 13,687 deals; thus contributing 87.57% and 57.03% to the total equity turnover volume and value respectively. The conglomerates industry followed with 97.545 million shares worth N261.502 million in 959 deals. The third place was occupied by the Consumer Goods Industry with a turnover of 94.738 million shares worth N3.122 billion in 3,531 deals.
Trading in the trio of Equity Assurance Plc, FCMB Group Plc and Zenith International Bank Plc accounted for 1.126 billion shares worth N2.325 billion in 3,544 deals, contributing 51.75% and 21.62% to the total equity turnover volume and value respectively.
Also traded during the week were a total of 33,808 units of Exchange Traded Products (ETPs) valued at N437,210.58 executed in 33 deals, compared with a total of 3,650 units valued at N1.641 million transacted in 40 deals in the previous week.
In the bond segment, a total of 1,000 units of Federal Government bonds valued at N1.157 million were traded in four deals, compared with a total of 275 units valued at N317,435.84 transacted in 3 deals in previous week.
There were 33 gainers during the week, higher than seven gainers recorded two weeks ago. There were 32 losers last week as against 56 losers in the previous week while 125 stocks closed the week flat. Transnational Corporation of Nigeria recorded the highest percentage gain of 30.61 per cent to close at N1.28. Tiger Branded Consumer Goods chalked up 26.37 per cent to close at N1.15 while FBN Holdings rose by 25 per cent to close at N4.50 per share.
On the downside, Honeywell Flour Mills recorded the highest loss of 17.78 per cent to close at N1.48. FCMB Group dropped by 16.10 per cent to close at 99 kobo while Seplat Petroleum Development Company lost 11.44 per cent to close at N156.71 per share.
On the over-the-counter market, companies listed on the NASD Plc recorded marginal gain last week as investors’ appetite for equities remained low. The NASD is an over-the-counter (OTC) platform that trades on unlisted securities. It is licensed by Securities and Exchange Commission (SEC). The NASD OTC was formally launched on July 1 and opened for trading on July 2, 2013.
The Unlisted Security Index (USI) and the market capitalisation appreciated by 0.40 per cent last week but most companies remained on offer. The USI closed the week at 666.09 points as against its opening index of 665.83 points. Aggregate market capitalisation at the NASD closed marginally higher at N394.90 billion as against its opening value of N394.77 billion. The USI is calculated using the total market capitalisation approach.
Volume traded rose by 215.13 per cent from 3.47 million units to 10.93 million units while the total value of shares traded also rose by 235.61 per cent from N33.52 million to N112.51 million in 55 deals. Three companies- Central Securities Clearing System (CSCS) Plc, Friesland Campina Wamco Nigeria Plc and Niger Delta Exploration & Production Plc (NDEP), were traded out of the 24 securities admitted to trade on the NASD OTC market.
Further analysis of the weekly report showed that CSCS was the lone gainer and most active stock during the week, rising by 0.54 per cent to close at N5.60 per share. It recorded a turnover of 10.56 million shares valued at N61.03 million in 41 deals. WAMCO placed second on the activity chart with a turnover of 0.311 million shares worth N44.46 million in 11 deals while NDEP closed the chart with a turnover of 0.061 million shares valued at N7.03 million in three deals.
Three companies- Central Securities Clearing System (CSCS) Plc, Friesland Campina Wamco Nigeria Plc and Niger Delta Exploration & Production Plc (NDEP), were traded out of the 24 securities admitted to trade on the NASD OTC market. The report indicated that most companies closed on offer without bid. These included Industrial & General Insurance Plc, Acorn Petroleum Plc, ARM Property, Afriland Properties Plc, Food Concepts Plc, Geo-Fluids Plc, Golden Capital Plc, Niger Delta Exploration & Production Plc, Partnership Investment Company Plc, Resourcery Plc, Trustbond Mortgage Bank Plc and Cappa & D’Alberto Plc.
Market pundits meanwhile remained cautious about the short-term outlook of the Nigerian stock market. Afrinvest (West Africa )-a Lagos-based investment and research group, advised investors with short-term outlook to reduce exposure to equities and amass fixed income securities by adopting an active fixed income trading strategy in 2016.
In its preview for 2016, Afrinvest noted that the financial market is currently going through a turbulent time as a reflection of the intensity of instability in the global and domestic environment. From slowing growth concerns in China and plunging commodity prices in the global market to fiscal and currency crises in the domestic economy.
The report outlined that the key concerns affecting investor sentiments were broadly the revenue structure of government which is mainly skewed to oil, the structure of foreign exchange earnings and foreign exchange restrictions and policy flip-flops that have rendered the operating environment for existing businesses and large companies decidedly negative and, tragically, increasingly hostile to the sorely needed foreign capital inflows.
“Whilst a blurry fiscal direction as well as instability in the global oil market kept investors watching, the scale and frequency of policy reversals by the apex bank have effectively doused any remaining morsel of investor optimism towards investing in Nigeria in the present time despite enticingly depressed asset prices. This has been amplified by the position to sustain an unrealistic exchange rate at the official/interbank market relative to the parallel market,” Afrinvest Securities stated.
The report projected three possible scenarios playing out in the equities market in 2016. Firstly, the bull case scenario with 20 per cent probability which sees the benchmark index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI), recording a marginal gain of 1.2 per cent in 2016. The second scenario, the base scenario, with 50 per cent probability which sees the NSE ASI declining by 5.9 per cent and the third scenario, the bear case scenario, with 30 per cent probability which sees the NSE ASI dropping by 9.4 per cent in 2016.
“Our overall expectation is a negative return of 5.9 per cent for the NSE ASI in 2016 bringing the index to close at 26,951 points by year-end,” Afrinvest Securities concluded.
The firm however noted that in spite of the steep declines that started this year, Nigerian equities have prospects to deliver considerable long-term return to investors.
Afrinvest Securities said the equities market has huge opportunities that could surmount the present slowdown and deliver better returns to investors over the long-term.
The investment firm noted that investors must not be discouraged by the current cloudy and disquieting moment but rather should focus on the long-term potential of the equities.
“Nevertheless, we maintain that the equities market presents a huge opportunity for long term positioning at the moment despite the obvious pessimism and difficulties,” Afrinvest Securities stated.
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