Stock market records largest drop in 6 weeks over political instability

Following the N456 billion loss recorded in the month of July in the stock market, the local burse on Wednesday launched the new month of August on a bearish note to halt the four-day bull run.

This was occasioned by the rising instability in the country’s political space and unimpressive first half 2018 performance of some highly capitalised stocks like Nestle, which dropped by 5.2 percent, Dangote Cement, 1.3 percent, and Nigerian Breweries, 1.9 percent, prompting investors to divest their portfolios.

Nigerian Breweries reported 22 percent drop in its Profit After Tax (PAT) earnings for the first half of year ended June 30, 2018 after posting N18 billion in the period compared with N24 billion recorded in the corresponding period of 2017, while Dangote Cement’s post tax earnings rose by 3 percent in the review period to N113.16 billion from N109.71 billion recorded a year earlier.

The two companies account for about half of the market’s total share value.

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On Tuesday, the Senate President, Bukola Saraki and Kwara State Governor, Abdulfatah Ahmed, announced their exit from the ruling All Progressives Congress (APC) to the main opposition party, the Peoples Democratic Party (PDP), this was followed by the defection of Sokoto State Governor, Aminu Tambuwal, 23 lawmakers in the Kwara State House of Assembly and 18 Sokoto State House of Assembly members from APC to PDP on Wednesday ahead of the 2019 general elections.

The development, which silently took over the relative positive corporate earnings of listed firms for the first half of 2018, caused the benchmark index of the Nigerian Stock Exchange (NSE), the All Share Index (ASI), to record its biggest drop since June 21 by 1.1 percent to 36,612.83 points from 37,017.78 recorded in the last session.

Specifically, investors lost N147 billion as market capitalisation of listed equities, which opened with N13.41 trillion, depreciated to N13.26 trillion, while the Month-to-Date and Year-to-Date losses moderated to -4.35% and -4.26%, respectively.

Cap and Royal Exchange recorded the biggest decline of 10 percent to close at N31.50 and 27 Kobo per share respectively. International Breweries trailed with 9.73 percent depreciation to close at N33.40 per share, while Unity Bank dropped by 9.30 percent to close at 78 Kobo per share.

On the positive side, Neimeth International Pharmaceuticals garnered the highest gain of 10 percent to close 55 Kobo. Jaiz Bank followed with 8.62 percent rise to close at 63 Kobo per share, while Okomu Oil appreciated by 6.30 percent to close at N81 per share.

Market turnover for the session stood at 240.21 million shares valued at N4.99 billion exchanged in 3,494 deals as against 244.97 million shares worth N4.49 billion in 5,943 deals on Tuesday.
Analysts advised investors to be cautious in their investment as political tension may possibly heighten in the short to medium term.

“We guide investors to trade cautiously in the short-to-medium term, as the absence of a positive one-off catalyst and brewing political concerns, continue to cast a shadow on our outlook for risky assets. However, the likelihood of recovery in the long term remains supported by stable macroeconomic fundamentals,” Cordros Capital stated.

However, analysts at Afrinvest Securities remained optimistic of a bull run, saying “we expect a rebound in subsequent trading sessions as investors hunt for bargain in existing attractive stocks.”

 

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