Average return by Nigerian equities nosed down to its recent low as major corporate earnings reports failed to stimulate valuations at the Nigerian stock market. Nigerian equities recorded a negative average return of -1.11 per cent in the immediate past week as sustained sell pressure saw the stock market closing negative in four of the five trading sessions during the week.
Many large-cap Nigerian stocks released their full-year audited reports and dividend recommendations for the 2017 business year during the week, including Dangote Cement-Nigeria’s largest quoted company, Access Bank, GlaxoSmithKline Consumer Nigeria, Ecobank Transnational Incorporated, Cadbury Nigeria and United Bank for Africa (UBA).
Benchmark indices at the Nigerian Stock Exchange (NSE) showed average week-on-week return of 1.11 per cent last week, equivalent to net capital depreciation of N166.5 billion. However, the supplementary listing of Lafarge Africa’s 3.1 billion ordinary shares boosted the aggregate market value of all quoted equities, thus reducing the face value of the downtrend to a loss of N20 billion.
The All Share Index (ASI)-the common value-based index that tracks share prices at the NSE declined from its week’s opening index of 41,935.93 points to close the week at 41,472.10 points. Aggregate market value of all quoted equities also dropped from the week’s opening value of N15.002 trillion to close the week at N14.982 trillion. The sustained decline depressed the average year-to-date return for Nigerian equities to 8.44 per cent. Nigerian equities had so far this month lost an average of 4.29 per cent.
The downtrend at the Nigerian equities market re-echoed the negative trend that dominated global equities markets during the week. From New York to London, Paris, Frankfurt, Beijing and other advanced and emerging economies, transactions were dominated by sell pressure. African equities were however largely contrarian and on the positive side, with the exception of Nigeria that follows the global trend.
Amidst concerns of trade war and proxy fights among global powers and questionable data safety in a digitalised world, global equities fluctuated downward for the most part of the week. In United States of America, the benchmark S & P 500 Index declined by 3.9 per cent. The Dow Jones Industrial Average (DJIA) dropped by 3.96 per cent while the NASDAQ Index slumped by 4.1 per cent. In United Kingdom, the FTSE 100 dropped by 3.22 per cent. Japan’s Nikkei Index dropped by 4.88 per cent. Hong Kong’s Hang Seng Index declined by 3.8 per cent. Germany’s DAX Index dipped by 3.5 per cent. China’s Shanghai Composite Index dropped by 3.6 per cent. The broader regional indices underlined the widespread price depreciation. Euro Stoxx 50 Index dropped by 3.60 per cent while the MSCI EM, which tracks emerging markets stocks, depreciated by 1.35 per cent.
In Africa, performance was largely positive, although Africa’s two largest markets-South Africa and Nigeria closed negative. South Africa’s FTSE/JSE ASI dropped by 2.7 per cent. However, Ghana’sGSE Composite Index rallied by 1.9 per cent while Kenya’s NSE 20 Index rose by 1.3 per cent.
Total turnover at the Nigerian equities market stood at 2.328 billion shares worth N28.927 billion in 25,530 deals last week as against a total of 2.444 billion shares valued at N36.665 billion traded in 26,712 deals in the previous week. Financial services sector remained atop activities chart with a turnover of 1.784 billion sharesvalued at N20.385 billion traded in 16,823 deals; thus contributing 76.60 per cent and 70.47 per cent to the total equity turnover volume and value respectively. The consumer goods sector followed with 171.111 million shares worth N5.404 billion in 4,055 deals while the third place was occupied by oil and gas sector with a turnover of 124.065million shares worth N296.727 million in 1,607 deals.
Bank dominated the top activities chart with Zenith International Bank Plc, Access Bank Plc and Fidelity Bank Plc leading as the three most active stocks. The three most active stocks accounted for 664.391 million shares worth N10.659 billion in 6,429 deals, contributing 28.54 per cent and 36.85 per cent to the total equity turnover volume and value respectively.
Also traded during the week were a total of 4,165 units of Exchange Traded Products (ETPs) valued at N78,276.06 in 15 deals compared with a total of 1.889 million units valued at N10.512 million traded in four deals penultimate week.
In the sovereign debt market, a total of 5,152 units of Federal Government bonds valued at N4.562 million were traded last week in 24 deals compared with a total of 40,566 units valued at N44.313 million traded in 29 deals two weeks ago.
Further price trend analysis showed widespread selloff at the Nigerian market, with the exception of banking stocks which posted impressive gain. The NSE 30 Index-which tracks the 30 most capitalised stocks, dropped by 0.53 per cent. The NSE Insurance Index declined by 3.06 per cent. The NSE Oil and Gas Index depreciated by 2.06 per cent. The NSE Industrial Goods Index dropped by 2.84 per cent while the NSE Consumer Goods Index declined by 2.19 per cent. The NSE Banking Index played the contrarian with a gain of 3.31 per cent.
There were 33 advancers against 49 decliners last week as against 25 advancers and 60 decliners recorded in the previous week. FTN Cocoa Processors and Veritas Kapital Assurance, formerly Unity Kapital Assurance, led the decliners, in percentage terms, with a drop of 21.4 per cent each to close at 22 kobo each. Niger Insurance followed with a drop of 16.7 per cent to close at 35 kobo. Multiverse Mining and Exploration declined by 16 per cent to close at 21 kobo while Cadbury Nigeria dropped by 14.9 per cent to close at N14.55 per share.
On the positive side, GlaxoSmithKline Consumer Nigeria, which recently announced special dividend payout, led the advancers with a gain of 21.4 per cent to close at N25.50. Fidelity Bank followed with a gain of 17.75 per cent to close at N2.72. Diamond Bank rose by 11.98 per cent to N2.15 while Zenith Bank International appreciated by 9.4 per cent to close at N30.20 per share.
Most analysts remained optimistic on the outlook for the Nigerian equities market, with many pointing at the sustained decline as an imminent trigger for bargain-hunting. The optimism was premised on the improving macroeconomic fundamentals and steady growths by most companies. During the week, Nigerian government buckled under pressure from lobbyists and unionists and declined to sign the African Continental Free Trade Area (AfCTA), which was ratified by 45 out of the 55 countries that made the African Union (AU). The AfCTA is expected to create the world’s largest continental free trade area in terms of participating members and allows free movement of goods and services across the African countries. But positive ratings report and growing sub-national economies overshadowed the backslide from a major agreement that Nigerian had championed previously.
Standards & Poors Global Ratings affirmed Nigeria’s rating at ‘B/B’ long- and short-term sovereign credit ratings with a stable outlook. The global agency also affirmed Nigeria’s long and short term national scale ratings at ‘ngBBB/ngA-2’. A report by the National Bureau of Statistics (NBS) also showed that most states recorded growth in internally generated revenues (IGR) in 2017. Total states’ IGR stood at N931.23 billion in 2017 as against N831.19 billion in 2016, representing an increase of 12 per cent. A total of 31 states grew their IGR while only five states suffered a contraction.
“We believe declining level of valuation has presented investors with attractive entry opportunity; hence, we expect a reversal of the bearish trend in the near term,” Afrinvest Securities stated.
Cordros Capital reiterated that its overall outlook for Nigeria equities remains positive citing the “still-positive macroeconomic fundamentals”.
“Also, we look for gains in the short term, as investors are likely to hunt bargains,” Cordros Capital stated.
This week is the deadline for all quoted companies that run the 12-month Gregorian calendar year as their business year to submit their audited annual reports for the 2017 business year. Reactions to corporate earnings will moderate pricing trend during the week.
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