The value of Nigerian equities depreciated by N1.6 trillion in January; a worse start to another year as investors struggled with long-running recession at the Nigerian stock market. The steep decline in January raised the specter of the past two years, when Nigerian equities had lost N3.38 trillion. The total average loss in January was slightly below N1.63 trillion lost in the entire 2015.
Aggregate market value of all quoted companies on the Nigerian Stock Exchange (NSE) closed January 2016 at N8.225 trillion as against its opening value of N9.851 trillion for the year, representing a loss of N1.596 trillion or 16.2 per cent.
The All Share Index (ASI)-the value-based common share index that tracks prices of all quoted equities at the NSE, dropped from its year-opening index of 28,642.25 points to close the month at 23,916.15 points. This indicates average month-on-month decline of 16.50 per cent. This implies that on the average, investors in the stock market lost some 16 per cent of their portfolios, which summed up to total loss of about N1.6 trillion.
All group and sectoral indices at the stock market showed widespread declines across the sectors with most equities closing at lower values. The steep decline was however driven by significant above-average losses suffered by most highly capitalised stocks. The NSE 30 Index, which tracks Nigeria’s 30 most capitalised companies, recorded a return of -16.56 per cent in January. The NSE Premium Index, which tracks the trio of Dangote Cement, FBN Holdings and Zenith Bank International, recorded the highest loss of -22.39 per cent, underlining the losses suffered by Dangote Cement, the most capitalised stock on the NSE. The broader NSE Main Board Index, which tracks all the equities on the main board of the Exchange, with the exception of the trio under the NSE Premium Index, indicated average decline of 13.22 percent. Banking stocks, which continued to wriggle under the spiral effects of the crude oil price crash, recorded average return of -11.02 per cent. For the insurance sector, were most stocks were already down at nominal value of 50 kobo; average return of -6.93 per cent loomed larger than other sectors.
Also, the NSE Consumer Goods Index declined by 16.81 per cent, highlighting the suppressed performance of several fast moving consumer goods companies. The NSE Oil and Gas Index showed some restraints with average decline of 10.09 per cent. The NSE Lotus Islamic Index, which tracks ethical stocks that comply with Islamic investment rules, dropped by 14.91 per cent. The NSE Pension Index, which tracks 40 companies specially screened as model portfolio for pension funds’ investments, recorded average return of -12.99 per cent. The NSE Industrial Goods Index, where losses by large-cap cement companies weighed on sectoral performance, recorded a full-month return of -19.82 per cent. The NSE ASeM Index, which tracks low-cap, emerging stocks on the second-tier board of the NSE, declined by 0.34 per cent.
The top-20 losers’ list was dominated by highly capitalised and leading stocks as investors turned round to sell some of their most liquid holdings to lock-in values and beat the illiquidity being orchestrated within the low-cap stocks by the overall apathy.
FCMB Group led the losers with a loss of 42.01 per cent. Unity Bank followed with a loss of 33.04 per cent. Oando placed third with a loss of 32.20 per cent. Other top losers included Transnational Corporation of Nigeria, -19.08 per cent; Nigerian Breweries, -26.46 per cent; Honeywell Flour Mills, -28.78 per cent; PZ Cussons Nigeria, -18.29 per cent; Unilever Nigeria, -18.52 per cent; Diamond Bank, 22.2 per cent; Skye Bank, -26.6 per cent; Union Bank of Nigeria, -20.43 per cent; AXA Mansard Insurance, -16.73 per cent; FBN Holdings, -23.39 per cent; SIM Capital Alliance Value, -17.7 per cent; GlaxoSmithKline Consumer Nigeria, -21.08 per cent; Dangote Cement, -24.17 per cent; Lafarge Africa, -17.36 per cent; Cutix, -17.47 per cent and Caverton Offshore Support Group, which recorded a full-month loss of 24.70 per cent.
In all, there were only a handful of contrarian stocks. Learn Africa, the penny-stock publishing company, held on strongly against the downtrend with the highest gain of 21.1 per cent. Five other stocks also recorded double-digit gain including Trans Nationwide Express, 10.6 per cent; Vono Proucts, 11.11 per cent; Cadbury Nigeria, 10.8 per cent; Tiger Branded Consumer Goods, 10.62 per cent and AG Leventis Nigeria, which rose by 11.29 per cent. Other stocks with gains during the period included Total Nigeria, 2.03 per cent; Portland Paints and Products Nigeria, 6.4 per cent; Cement Company of Northern Nigeria, 2.7 per cent; E-Tranzact, 4.6 per cent; Fidson Healthcare, 8.0 per cent; Custodian Alliance Insurance, 2.4 per cent; Wema Bank, 2.0 per cent; Seven-Up Bottling Company, 7.7 per cent and Julius Berger Nigeria, which rose by 3.57 per cent.
The steep decline in January has further raised anxieties about the short-term outlook of the Nigerian stock market, after two successive years of huge losses. Against all projections, the Nigerian stock market closed 2015 with a negative full-year average return of -17.36 per cent, nearly a notch above -16.14 per cent recorded in 2014. Approximately, this implied a loss of N1.63 trillion in 2015, a somewhat hard-to-bear addition on a loss of N1.75 trillion recorded in 2014. Altogether, Nigerian equities had lost N3.38 trillion in the past two years, nearly a quarter of their market value of N13.226 trillion recorded at the beginning of the period.
Aggregate market value of all quoted equities on the NSE closed 2015 at N9.851 trillion as against its opening value of N11.478 trillion for the year, representing a loss of N1.627 trillion. The ASI closed 2015 at 28,642.25 points as against its opening index of 34,657.15 points. The losses in 2015 worsened the downtrend that had in 2014 marked out Nigerian equities among the worst-performing stocks globally with average full-year decline of 16.14 per cent. Aggregate market value of all quoted equities had closed 2014 at N11.478 trillion as against its opening value of N13.226 trillion for the year, indicating a loss of N1.75 trillion during the year. Within the context of historic trend, the ASI had peaked above 57,000 points in 2007 and recently in 2013 closed above 41,000 points.
Acting president, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, pointed out that the current steep decline at the stock market is due to three main factors including adverse macro-economic environment largely due to the drastic drop in the price of crude oil, negative public sentiment which is related to the state of the macro-economy and the retreat of foreign portfolio investors which is related to CBN’s policy on foreign exchange.
Analysts at Afrinvest Securities noted that as the administrative measures in the forex market remain, the financial market, particularly equities, would remain pressured as unfriendly monetary policy around forex continues to keep foreign portfolio investors locked out, driving negative sentiments on the market.
“Our overall short term outlook remains bearish on macroeconomic concerns and forex inflexibility; hence, we reiterate our long term investment case on Nigerian equities,” Afrinvest Securities stated.
Most analysts agreed on the medium-to-long term potential of Nigerian equities. Analysts at GTI Securities said they expected the market to begin gradual recovery later this year as anticipated increase in business activities would boost investment interest in the stock market. This would particularly be aided by the fact that handful of stocks currently trade at their five-to-six years lows.
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