Decline in Bond Yields Lifts Equities Market

03 Dec 2012

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Trading session at NSE

By Eromosele Abiodun
After two weeks of dismal performance, the Nigerian equities returned to positive territory last week as more investors increased their exposures to the equities market due to the recent fall in bond yields. The yield on the 5-year FGN Bond maturing November 2013 fell to 11.95 per cent last Thursday from 12.11 per cent on Wednesday, while also the 3-year FGN Bond’s yield fell to 12.30 per cent from the 12.44 per cent it traded last Wednesday.

Investors had the previous week waited in vain for the market to rebound as the stock market drifted further southward following sell-offs on some high capitalised stocks in the consumer goods and financial services sectors.

Trading however resumed last Monday on a positive note as bargain hunters took position for possible gains. The market took a different direction the next day as it returned southward on the back of renewed profit taking. It returned northward on Wednesday as yields on fixed income instruments retreated. It rose again last Thursday, extending the gains of previous trading days as investors purchased blue chip stocks across all sectors.

The market remained northward at the close of business last Friday driven by gains recorded in the share prices of a number of highly capitalised stocks, such as FBN Holdings Plc, Nigerian Breweries Plc, Zenith Bank Plc, Nestle Nigeria Plc and Unilever Nigeria Plc.
Consequently, major market indicators closed the week firmer led by the twin market gauge, the All-Share Index or ASI and the market capitalisation.

A review of trading statistics released by the Nigerian Stock Exchange (NSE) showed that the exchange’s benchmark index appreciated by 0.65 per cent to close at 26,494.44 points.
Also, the market capitalisation of the listed equities went up by 1.01 per cent to close the week at N8.466 trillion.

Four of the sectorial indices appreciated during the week; the NSE-30, the NSE Consumer Goods, the NSE Oil/Gas and NSE Lotus II Indices respectively appreciated by 0.64 per cent (+36.24 per cent YTD), 2.56 per cent (+33.68per cent YTD), 3.40 per cent (-29.32per cent YTD) and 3.87 per cent (+37.95per cent YTD). However, the NSE Banking and the NSE Insurance Indices respectively dropped by 22.16 per cent (+11.19per cent YTD) and 0.79 per cent (-20.53per cent YTD).
Market Turnover
A further analysis of the trading results showed that investors sold a total of 1.216 billion ordinary shares worth N8.886 billion made in 18,902 deals in contrast to a total of 1.178 billion shares valued at N9.279 billion that exchanged hands the previous week in 18,621 deals.
The financial services sector accounted for 753.907 million shares valued at N5.005 billion traded in 10,938 deals. The conglomerates sector followed with 201.552 million shares valued at N324.579 million traded in 806 deals.

The banking subsector of the financial services sector was the most active during the week (measured by turnover volume); with 471.559 million shares worth N3.856 billion exchanged hands by investors in 7,836 deals. The volume of shares sold in the banking subsector was largely-driven by activity in the shares of Access Bank Plc, FBN Holdings Plc, and Zenith Bank Plc.

Trading in the shares of the three banks accounted for 185.284 million shares, representing 40.80 per cent, 25.52 per cent, and 15.83 per cent of the turnover recorded by the subsector, sector and total turnover for the week, respectively.

The diversified industries subsector of the conglomerates sector, boosted by activity in the shares of Transnational Corporation of Nigeria Plc (Transcorp), followed on the week’s activity chart with a subsector turnover of 201.552 million shares representing 16.58 per cent of the total turnover for the week.

Also traded during the week were 550 units of NewGold Exchange Traded Funds (ETFs) valued at N1.462 million exchanged hands in 5 deals in contrast to a total of 500 units valued at N1.327 million transacted last week in 5 deals.

Similarly, 550 units of FGN Bonds valued at N463.301 were traded during the week in 2 deals. However, there were no transactions in the State/Local Government Bonds and Corporate Bonds/Debentures sectors.
Summary of Price Changes
Review of the equity price movements during the week under review indicated that 30 equities gained while 34 equities recorded price declines and prices of 134 equities remained constant.
When compared with the preceding week, 26 equities gained while 43 equities recorded price decline and prices of 129 equities remained constant.

The top 10 gainers in the top 10 category included: Nestle Nigeria Plc (N52.00), GlaxoSmithKline Consumer Nigeria. Plc (N7.99), Total Nigeria Plc (N5.93), Unilever Nigeria Plc (N2.55), Nigerian Breweries Plc (N2.22), Conoil Plc (N1.73), Julius Berger Nigeria Plc (N1.50), Lafarge WAPCO Plc (89 kobo), Presco Plc (71 kobo) and Oando Plc N51 kobo).

On the other hand, the top 10 losers were: CAP Plc (N1.41), MRS Oil Nigeria Plc (N1.38), Stanbic IBTC Holdings Plc (N1.26), New Nigeria Flour Mills Plc (96 kobo), Academy Press Plc (64 kobo), Flour Mills Nigeria Plc and Guaranty Trust Bank Plc (50kobo each), Morison Industries Plc (45 kobo), ARBICO Plc 36 kobo), P Z Cussons Nigeria Plc (32 kobo).
Nigerian Bourse Records First
Meanwhile, the NSE made history last week when it became the first capital market operator in Africa to launch the NSE Market Quality Report (X-Qual). The NSE Market Quality Report was introduced to key stakeholders at the Nigerian capital market committee retreat and conference in Warri, Delta State on last week.

The Chief Executive Officer of the NSE, Mr. Oscar Onyema, said the X-Qual was designed to disclose the extent to which equities traded at the Exchange provide executions at prices better than the prevailing price quotes before an investor places an order.

“The information will no doubt enable analytical investors or broker-dealers gain a better understanding of how best to execute orders in the market and the quality of execution they can expect for the different stocks being traded”, he said.
He added that the report include information about the exchange’s quality of executions on a stock-by-stock basis, including how orders of various sizes were executed relative to the available price quotes.

The report, he added, also disclosed information about effective spreads (the spreads actually paid by investors when their orders are executed), realised spreads (shows whether the liquidity providers for a trade subsequently have the price move in their favour after the trade), fill rates (the likelihood of executions to occur), and execution speed (time taken to execute orders).

He explained that Nigeria had no rules governing the disclosure of order execution and routing practices but in developed markets, there are rules that require and govern such disclosures.

The NSE boss further stressed that liquidity and transparency were the two most important criteria for a company looking to list on an exchange while disclosure was paramount to transparency and to attracting participation in any market.

Tags: Nigeria, Featured, Business, NSE

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