NSE Roundup! Equities in increased bargain-hunting

Nigerian equities stooped to their lowest value in three years early last week but quickly rebounded to close the week with a modest week-on-week gain of 0.05 per cent, equivalent to about N5 billion, the first weekly gain in recent weeks.

There was also increased level of activities as turnover volume and value rose by 17 per cent and 12.9 per cent respectively. But the overall market situation remained cautious and ponderous as investors continued to weigh policy directions as well as possible year-end earnings and returns of quoted companies.

Most market pundits agreed that the recovery last week was due to increased bargain-hunting, driven by a combination of rock-bottom prices of stocks, reduction in fixed-income earnings outlook and expectations on the full-year earnings of quoted companies. Most companies on the Nigerian Stock Exchange (NSE) run the Gregorian calendar year, ending December 31, as their business year.

Post-listing rules at the NSE requires quoted companies to submit their audited annual report and accounts not later than three months after the end of the business year. This imposes March 31, 2016 deadlines on most companies to submit their full-year earnings report. The NSE usually has an average of about 80 per cent compliance and early compliance is quite large.

Analysts at FSDH Securities described the upturn as “December effect”, referencing the known tendency by portfolio managers to rebalance their portfolios with year-end expectations and the seeming but subtle underlying motives by some portfolio managers to ensure that their portfolios end the year in somewhat better-than-average position.
The All Share Index (ASI)-the value based common index that tracks prices of all quoted companies on the NSE, inched up by 0.05 per cent to close weekend at 27,631.05 points as against its week’s opening index of 27,617.45 points. Aggregate market value of all quoted companies also rose correspondingly from N9.495 trillion to close at N9.500 trillion. The modest rally slightly reduced the negative average year-to-date return to -20.27 per cent.

The market performance was however driven to a large extent by gains by some highly capitalised stocks, especially in the fast moving consumer goods and building materials sectors. There were only 28 gainers against 51 losers last week, compared with 21 gainers against 41 losers in the previous week. A total of 111 stocks closed flat last week compared with 128 stocks in the previous week.

Investors also appeared to be scouting for small and mid-cap stocks, many of which have been turned into penny stocks, to lock in values. Penny stocks rise faster in recovering and intensely positive markets as investors tend to fall back on low-priced but operationally stable companies.

May & Baker Nigeria Plc led the advancers last week with a gain of 10.64 per cent to close at N1.04. Okomu Oil Palm followed with a gain of 10.22 per cent to close at N29.65. Cutix placed third with a gain of 9.55 per cent to close at N1.72. Learn Africa rose by 6.45 per cent to close at 66 kobo. Law Union and Rock Insurance added 5.77 per cent to close at 55 kobo. Red Star Express, McNichols and Continental Reinsurance rose by 5.0 per cent each to close at N4.20, N1.26 and N1.05 respectively. Beta Glass rose by 4.99 per cent to close at N50.93 while Unilever Nigeria grew by 4.81 per cent to close at N41.82.

Total turnover stood at 1.22 billion shares worth N14.685 billion in 13,495 deals last week compared with a total of 1.04 billion shares valued at N13.01 billion traded in 13,407 deals in the previous week. The financial services sector remained the dominant sector with a turnover of 1.07 billion shares valued at N9.89 billion in 7,803 deals; representing 87.7 per cent of aggregate turnover volume. The consumer goods sector placed a distant second with a turnover of 48.45 million shares worth N2.450 billion in 2,560 deals. Conglomerates sector ranked third with a turnover of 45.914 million shares worth N364.525 million in 622 deals.

The trio of Guaranty Trust Bank Plc, FBN Holdings Plc and Union Homes Savings And Loans Plc were the three most active, jointly accounting for 610.56 million shares worth N7.340 billion in 3,262 deals, representing 50.1 per cent of total turnover volume.

Also traded during the week were a total of 23,812 units of Exchange Traded Products (ETPs) valued at N417, 201.24 in 32 deals, compared with a total of 49,895 units valued at N916,710.90 traded in 38 deals in the previous week. Also, a deal was struck for 90 units of Federal Government of Nigeria (FGN) bonds valued at N109,423.68 last week compared with seven deals struck for a total of 8,262 units of FGN bonds valued at N9.151 million in the preceding week.

On the downside, Unity Bank was the highest loser, in percentage terms, with a decline of 27.45 per cent to close at 74 kobo. Tiger Branded Consumer Goods followed with a loss of 17.53 per cent to close at N1.27. Vono Products declined by 16.28 per cent to close at 72 kobo. Ikeja Hotels dropped by 13.11 per cent to N3.18. Honeywell Flour Mills lost 12.98 per cent to close at N1.81. Eterna dropped by 10.59 per cent to close at N1.52 while FBN Holdings dropped by 10.09 per cent to close at N4.90 per share.

Global stock market analysis showed that the Nigerian stock market performed considerably better than many advanced and emerging markets. In Europe, it was a negative week as investors reacted to the decision of the European Central Bank to maintain its stimulus package, contrary to expectations of increased stimulus by several pundits. In London, the United Kingdom FTSE declined by 1.6 per cent. France’s CAC index dropped by 4.3 per cent while Germany’s benchmark XETRA DAX declined by 4.6 per cent. In United States, S&P 500 index dropped marginally by 0.7 per cent as improved job report steadied the market against the European fall.

Emerging markets were also largely negative. Brazil’s benchmark index, Ibovespa, dropped by 1.4 per cent. South Africa’s JSE/FTSE Index dropped by 4.6 per cent. Ghana’s GSE Index and Kenya’s Nairobi Stock Exchange 20 Index dropped by 0.1 per cent. However, Egypt’s EGX 30 rose by 5.5 per cent.

Analysts remained cautious about the outlook for the Nigerian stock market. Afrinvest Securities in a weekend note stated that the realities of funding the 2016 budget may ultimately lead to devaluation before the second half of 2016 which may signal a turn of market sentiment. However, more realistic drivers of sentiment that may materialize in the short to medium term and garner investor confidence for equities may include success of the economic team of President Buhari in articulating a fiscal plan to reflate the economy with emphasis on investment in key infrastructures such transport, power, support for SMEs, domestic agriculture and agro-based industries, reduction in government overhead and removal of unproductive spending such as subsidy.

“We perceive that a number of these signals are not supportive of a short term phenomenal change in the current bearish equities dynamics. Consequently, it is our opinion that the current equities market condition may persist with pockets of opportunistic value seeking position-taking that may guarantee short term market gains which may not be sustained until any of the anticipated fiscal and monetary signals comes into force,” Afrinvest Securities stated on the immediate outlook of the market.

Analysts at Afrinvest Securities however agreed with several others that market sentiments appeared to be improving and bargain-hunting might continue to drive modest recovery in the meantime.
Notwithstanding, there is analysts’ consensus on the bright prospects of the Nigerian equities in the medium to long term, with analysts urging investors to seek deep positions in stocks with good fundamentals and strong operations and cashflow to weather tight economic condition.

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