NSE RoundUp! Nigerian equities still lead global stocks amidst Brexit scare

Nigerian equities ended last again as one of the biggest advancers in the global equities market as sustained rallies triggered by the commencement of the implementation of the new flexible foreign exchange (forex) policy of the Central Bank of Nigeria (CBN) absorbed the immediate global shock that greeted the decision of the United Kingdom (UK)’s voters to leave the European Union (EU) at the weekend.

Against the generally negative performance of most tracked advanced and emerging markets last week, Nigerian equities retained net capital gain of N482 billion, equivalent to week-on-week average gain of 4.79 per cent, the highest percentage gain by any of the tracked markets in Europe, America, Asia and Africa.

Nigerian equities’ average year-to-date return thus nudged further to 7.01 per cent, underlining the positive sentiments that had greeted the announcement and implementation of the framework for the new flexible forex policy.

The CBN had penultimate Wednesday released the new forex framework and last Monday started the implementation. The apex bank had also on Monday launched a one-off intervention to clear the backlog of forex demand on Monday, leaving the forex market on a plain level field. The new forex policy essentially removes the official fixed peg on Naira to allow the currency to flow according to market forces. Naira has since hovered around N280-N285 per Dollar as against the previous official peg of N197/$.

But while the new forex policy sustained massive rallies at the Nigerian stock market between Tuesday and Thursday, the decision by UK to leave the 28-nation EU, otherwise known as Brexit, created panics in the Nigerian financial marketson Friday as foreign portfolio investors sought to monetize their assets while assessing the unfolding impact of the epoch decision on global investment markets.

The results of the Brexit referendum released on Friday morning showed that fifty per cent of the voters voted for withdrawal of the UK from EU, prompting the British Prime Minister, David Cameron, who had led the campaign to stay in the EU to announce his resignation and sending the global financial market into a tailspin.

Nigerian equities lost N144 billion within the five-hour trading session immediately after the announcement on Friday. Market dealers at the Nigerian Stock Exchange (NSE) said the slide on Friday was due to foreign portfolio divestments partly linked to the Brexit.

Foreign investors account for nearly half of transactions at the Nigerian stock market, and both the new forex policy, which was welcomed by anxious foreign investors that had agitated for the change, and the Brexit decision were the two major opposing dynamics that shaped the Nigerian market last week.

The anticipation of renewed inflow of foreign portfolio investments (FPIs) due to new forex policy meanwhile quickened the appetites of local investors and speculative traders, whose bargain-hunting transactions continued to fuel rallies and cushion the global shocks from the emerging global political and economic realignments.

Read also: NSE LIVE! Equities surge on with N324bn gain

Altogether, the benchmark index for the Nigerian stock market, the All Share Index (ASI), closed the week at 30,649.66 points as against its week’s opening index of 29,247.27 points, representing average week-on-week gain of 4.79 per cent. Aggregate market value of all quoted equities at the NSE also rose by N482 billion from the week’s opening value of N10.045 trillion to close at N10.527 trillion.

The performance of the Nigerian stock market contrasted sharply with the generally negative performances of most global markets. In the United States of America (USA), the twin indicators closed negative. In Europe, it was a steep decline. Germany’s DAX Index closed with a week-on-week decline of 0.2 per cent. France’s CAC Index declined by 1.0 per cent. The UK’s FTSE Index however resisted with a gain of 1.8 per cent after Governor of the Bank of England stated that it would inject £250 billion into the UK economy to stabilize the system. In Asia, Japan’s Nikkei Index tumbled by 4.2 per cent while Hong Kong’s Hang Seng Index inched up by 0.4 per cent.

In the five-nation bloc of Brazil, Russia, India, China and South Africa (BRICS), it was generally a reddish market. Russia’s RTS Index fell by 4.1 per cent. China’s Shanghai Index dropped by 1.1 per cent. India’s Bombay Stock Exchange (BSE) Index dropped by 0.9 per cent while South Africa declined by 0.6 per cent. However, Brazil’s IBOVESPA Index played the contrarian, rising by 1.4 per cent.

In other African markets, Ghana Stock Exchange (GSE) Index followed Nigeria with a gain of 0.8 per cent while Kenya’s Nairobi Stock Exchange (NSE) Index and Egypt’s EGX Index followed South Africa with decline of 2.3 per cent and 2.1 per cent respectively.

Meanwhile, turnover at the Nigerian stock market rose to 2.387 billion shares worth N26.381 billion in 28,072 deals last week as against a total of 2.158 billion shares valued at N20.394 billion traded in 24,369 deals two weeks ago. The financial services industry led the activity chart with 1.951 billion shares valued at N16.832 billion traded in 17,226 deals; representing 81.75 per cent and 63.8 per cent of the total equity turnover volume and value respectively. The conglomerates industry followed with 223.156 million shares worth N477.064 million in 1,461 deals. The third place was occupied by the consumer goods industry with a turnover of 91.705 million shares worth N6.253 billion in 4,433 deals.

The three most active stocks were United Bank for Africa Plc, Zenith International Bank Plc and Guaranty Trust Bank Plc, which altogether accounted for 887.282 million shares worth N12.894 billion in 7,483 deals, representing 37.17 per cent and 48.88 per cent of the total equity turnover volume and value respectively.

There were 40 advancers against 32 decliners and 108 flat stocks last week as more equities joined the price change table. GlaxoSmithKline Consumer Nigeria recorded the highest gain of 55.56 per cent to close at N22.12. Champion Breweries followed with a gain of 44.35 per cent to close at N4.98 while Transnational Corporation of Nigeria rose by 31.58 per cent to close at N2. On the negative side, NEM Insurance led with a drop of 13.76 per cent to close at 94 kobo. Transnationwide Express declined by 10.19 per cent to N1.41 while DN Meyer dropped by 9.09 per cent to close at 90 kobo.

Analysts expected the Nigerian market to continue on the uptrend in the meantime with the positive sentiments from the new forex policy absorbing the Brexit shocks.

“We expect the market to regain uptrend next week as investors shake-off the outcome of the Brexit referendum while keeping their eyes on second quarter 2016 earnings scorecards,” Afrinvest Securities, a Lagos-based dealer on the NSE, stated on the outlook for the Nigerian market this week.

 

 

 

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