Equities Approach New High on Positive Sentiment

23 Apr 2012

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Trading at NSE

By Goddy Egene and Eromosele Abiodun

Investors in the Nigerian stock market had something to smile about last week as the market remained upbeat throughout the week on the back of renewed positive sentiment following strong first quarter results released by banks and other blue chip companies.

The market had the previous week relapsed to negative territory after the excitement generated by the introduction of market makers following rising interbank rates and weak investors’ appetite driven by poor year-end results released by some banks.

But things took a dramatic twist when news of banks’ dividend payment and positive first quarter results hit the market.

Trading resumed on a positive note last Monday and extended the run to Wednesday. It went further northward on Thursday and Friday as the Nigerian Interbank Offer Rates, which increased from Monday to Wednesday moderated towards the weekend.
Consequently, the market approached a new high with major market indicators closing firmer, led by the twin market gauge-the All-share Index or ASI and the market capitalisation.

An analysis of trading statistics released by the Nigerian Stock Exchange (NSE) showed that the exchange’s benchmark index appreciated by 1013.34 points or 4.89 per cent to close on Friday at 21,756.50 while the market capitalization of the 187 main board equities appreciated from N6.615 trillion to N 6.938 trillion.

Also, the NSE-30 Index, which mirrors the 30 most capitalised stocks appreciated by 48.14 points or 5.08 per cent to close at 995.93 points. The NSE-ASI and NSE-30 Index had the previous week depreciated by 0.95 per cent and 0.88 per cent respectively.

Two of the four sectorial indices appreciated during the week compared to one during the preceding week. While, the NSE Consumer Goods Index went up by 76.22 points or 4.52 per cent to close at 1764.26 points, the NSE Banking Index grew by 27.95 points or 9.77 per cent to close at 313.95 points.

However, the NSE Insurance Index depreciated by 0.95 points or 0.75 per cent to close at 125.71npoints and the NSE Oil/Gas also declined by 6.99 points or 3.75 per cent to close at 179.34 points.

A further review of the NSE trading statistics revealed that investors sold a total of 2.049 billion ordinary shares worth N15.736 billion made in 19,783 deals, in contrast to a total of 1.582 billion ordinary shares valued at N7.858 billion exchanged the previous week in 14,492 deals. The Financial Services sector accounted for 1.767 billion shares valued at N10.783 billion traded in 10,827 deals while the Consumer Goods Sector followed with 113.97 million shares valued at N3.65 billion traded in 3,520 deals. The previous week the Financial Services sector led on the activity chart and was followed by the Conglomerates sector.

The banking subsector of the Financial Services sector was the most active during the week (measured by turnover volume) with 1.414 billion shares worth N10.446 billion exchanged by investors in 10,247 deals. The volume of shares traded in the banking subsector was largely driven by activity in the shares of United Bank for Africa Plc, First City Monument Bank Plc and Guaranty Trust Bank Plc.

Trading in the shares of the three banks accounted for 756.214 million shares, representing 53.49per cent, 42.80 per cent and 36.89 per cent of the turnover recorded by the subsector, sector and total turnover for the week, respectively.

The Insurance carriers, brokers and services subsector of the Financial Services sector, boosted by activities in the shares of Guaranty Trust Assurance Plc, followed on the week’s activity chart with a subsector turnover of 130.595 million shares valued at N213.82 million traded in 121 deals.

The previous week, the banking subsector led on the activity chart and was followed by the Diversified Industries subsector.

Also traded during the week were 105 units of NewGold Exchange Traded Products (ETFs) valued at N264,135.00 exchanged in 3 deals. However, there were no transactions executed through the stock market in the Federal Government Development Stocks, State and Local Government Bonds and Corporate Bonds/Debentures Stocks sectors.

Gainers and Losers
The price movement chart of the NSE displayed a total of 33 equities that appreciated in price during the week, higher than the 21 of the preceding week. Nigerian Breweries Plc led on the gainers’ table with a gain of N11.20 or 11.43 per cent to close at N109.20 per share while Guinness Nigeria Plc followed with a gain of N10.16 or 4.51 per cent to close at N235.25 per share.

Other price gainers’ in the Top 10 category include: Dangote Cement Plc (N4.00), CAP Plc (N3.59), NCR (Nigeria) Plc (N2.04), First Bank of Nigeria Plc (N1.89), Okomu Oil Palm Plc (N1.50), Guaranty Trust Bank Plc (N1.18), UACN Plc (N1.15) and National Salt Company Nigeria Plc (N1.05).

On the other hand, 34 stocks depreciated in price, higher than the 33 of the preceding week. Nestle Nigeria Plc led on the price losers’ table, dropping by N15.99 or (3.68%) to close at N419.00 per share while Conoil Plc followed with a loss of N2.26 or (9.73%) to close at N20.96 per share.

Other price losers in the Top 10 category include: MRS Oil Nig. Plc (N2.22), PZ Cussons Nigeria Plc (N1.60), Oando Plc (N1.20), Berger Paints Plc (82 kobo), Ashaka Cement Plc (70 kobo), UACN Property Development Plc (65 kobo), Beta Glass Company Plc (63 kobo) and Forte Oil Plc (58 kobo).
Capital Market Probe
Meanwhile, the House of Representatives committee probing the capital market resumed their public hearing last week with a little bit of confusion as a mild drama indicating a disconnect in leadership ensued as two principal officers from the House were simultaneously mandated to declare open the new ad hoc committee investigating the near collapse of the nation’s capital market.

The Speaker, Rt. Hon. Aminu Tambuwal, had earlier commissioned the Majority Leader of the House, Rep Mulikat Akande Adeola, to represent him at the event because he was bogged down by other assignments.  

But before the Leader could get to the event to deliver the Speaker’s message, the House Minority Leader, Rep Femi Gbajabiamila, had taken over the assignment to represent Tambuwal.

Midway into Gbajabiamila’s speech, Akande-Adeola appeared with written speech to perform the official function but was taken aback when she realised that Gbajabiamila had taken over. She had to turn back at the door as she hurried back to her office embarrassed.

The incidence, analysts said, only added fillip to the perceived politics of relevance being played by both parties.  
However, the ad hoc committee chaired by Rep. Ibrahim Tukur El-Sudi, resumed investigation into the near collapse of the Nigerian capital market.

The chairman in his opening remarks promised transparency, fairness and justice in the conduct of the exercise even as he vowed to dig deep into the root of the problems in order to find a workable solution to the lingering capital market crisis.

According to him, the capital market’s value went down from N13.5 trillion to N4.6 trillion within 10 months in 2008.

“We promise to keep open mind and do our best to ensure that this investigation marks the beginning of the turnaround of our Capital Market in Nigeria.''
Declaring the public hearing open, the Speaker of the House of Representative Rt. Hon. Aminu Waziri Tambuwal, represented by Gbajabiamila directed the committee on capital market to probe and avoid blame game in their quest to find reasons for the near collapse of the market.
Corporate Governance Rules
In another development, during the week under review, THISDAY gathered that the Financial Reporting Council (FRC) of Nigeria, a body charged with the developing and publishing accounting and financial reporting standards for public companies in Nigeria, will soon issue an exposure draft of a unified code of corporate governance that will harmonise the various rules on corporate governance in the country.

Banks and insurance companies, for instance, are guided by separate corporate governance codes issued by the Central Bank of Nigeria and the National Insurance Commission (NAICOM) respectively.

Yet, the same financial services firms and public firms listed on the NSE are still guided by another code of corporate governance issued by the Securities and Exchange Commission (SEC).

There have been efforts to unify the rules in order to eliminate conflict of interest and ensure smooth implementation of the codes for better results.

In this regard, THISDAY checks revealed last Monday that a draft copy of the unified code of corporate governance rules would soon be exposed.
The Executive Secretary/Chief Executive Officer of FRC, Mr. Jim Obazee, who confirmed this to this THISDAY said he was positive that the unified code would address the concerns of all stakeholders.

According to him, he had hinted the need for unified corporate governance during his visits to some of the regulators in the financial industry. During his visit to Central Bank of Nigeria (CBN) last February, for instance, the Governor, Lamido Sanusi Lamido, was said to have agreed on the need to harmonise rules of corporate governance in the country.

The Director-General of SEC, Ms. Arunma Oteh, had similarly assured the FRC boss on the commission’s readiness to work towards the harmonisation of corporate governance rules in the country.

Obazee said if all the provisions in the separate codes were harmonised, they would serve companies better and protect investors better.
He said the council had also received significant support from the Corporate Affairs Commission (CAC) in the efforts to codify the rules. FRC and CAC are both under the Ministry of Trade and Investment.

THISDAY checks revealed that section 11 of the FRC Act of 2011 empowers the Council to protect investors and other stakeholders’ interest; give guidance on issues relating to financial reporting and corporate

Governance; ensure good corporate governance practices in the public and private sectors of the Nigerian economy ; ensure accuracy and reliability of financial reports and corporate disclosures, pursuant to the various laws and regulations currently in existences ; and harmonise activities of relevant professional and regulatory bodies as relating to Corporate Governance and Financial Reporting.
Shareholders Commend Regulators
In a related development, shareholders under the aegis of the Association of Advancement of the Rights of Nigerian Shareholders (AARNS) last week commended efforts being made by the regulators in the Nigerian capital market to ensure that listed companies migrate to the International Financial Reporting Standard (IFRS).
IFRS is a new global reporting regime and the Nigerian government has set the current financial year for all companies to migrate to the new standard.

Speaking in an interview with THISDAY, President of AARNS, Dr. Faruk Umar, said that the machinery already put in place by the Securities and Exchange Commission (SEC) for full adoption of IFRS by companies had started yielding good results.
According to him, companies are now making fuller disclosures about their operations, sending profit warning to investors ahead and giving details about their changes in their board or operations.

“From what we have seen so far, the migration to IFRS, will be in favour of the companies and investors because there would be more disclosures. Now we can see companies telling investors ahead of time if there will be any change in performance or losses. This will enable the investors to prepare their minds and make necessary adjustments in their portfolios. We must commend the efforts of the SEC and other regulators who have been working to make sure that quoted companies give more information to investors in order to make good investment decisions,” Faruk said.

He added that with IFRS, everything would be accounted for, saying: “Whatever movement in assets must be disclosed. It will no longer be business as usual whereby some things were hidden. The IFRS requires high standards of disclosure and this I believe will be in the interest of shareholders going forward,” he said.

According to the AARNS boss, what is needed now is more education and enlightenment for investors on new regime in financial reporting.

The Director-General of SEC, Ms. Arunma Oteh, said recently that the commission had since 2011 continued to invest enormous resources to ensure seamless transition by public companies.

“The commission in liaison with other stakeholders such as the Financial Reporting Council of Nigeria has put in place necessary measures to build required capacity in this regard. The Nigerian Capital Market Institute (NCMI) was approved for the proposed IFRS Academy. In a similar development, the SEC is working with the World Bank to organise IFRS Clinics for the purpose of providing technical support to public companies,” she said.

According to her, a series of workshops and seminars were held to acquaint Chief Executive Officers, Finance Directors and Compliance Officers of targeted companies with the IFRS.
Debt Management Office
Meanwhile, the renewed optimism in the stock market may be hampered if news that the Debt Management Office (DMO),  intended to issue bonds worth between N210 billion and N290 billion bonds this quarter is anything to go by.

The schedule on the fixed income instrument for this quarter posted on the debt office’s website showed that bond would range between 3 and 10 years.

The DMO revealed that it would auction between N15 billion and N25 billion in 3-year paper in April and between N30 and N40 billion debt in 5-year and 10-year bonds each in the same month.

Similarly, in May, the debt office plans to issue between N30 billion and N40 billion worth in 5-year and 10-year bonds, respectively, while in June it would issue bonds between N25 billion and N35 billion in 5-year, 7-year and 10-year paper, respectively.

Commenting on the development, Emerging Markets Strategist, Standard Bank Plc, London, Samir Gadio, in a note to THISDAY recently, stated that bonds reacted negatively to the announcement late last week, erasing earlier gains.

However, he said that the fixed income instrument have since stabilised around the band of 15.2 per cent and 15.4 per cent (excluding the 20-year).

Gadio added: “We feel this adjustment represents a chance to re-enter the duration trade which will be supported by a gradual shift to more accommodative monetary policy and an improving inflation outlook post-third quarter 2012.

“Additionally, Nigeria’s fixed income space remains predominantly a bidder’s market because of the irregular bond supply (only one monthly auction) and limited pool of investable assets. The market will also progressively start to consider the possibility that Nigeria's bonds could eventually be included in the JP Morgan GBI local currency index (and short term instruments in the ELMI+ index), which would definitively generate further international demand for domestic debt.”
Institute of Director
Following recent report ranking Nigeria among the worst countries to do business, the Institute of Directors (IoD), during the week under review called on the Federal Government to address the state of infrastructure in the country as a key step towards reversing the trend.

Speaking at a briefing to announce its forthcoming maiden convention, scheduled for Abuja, President/Chairman of Council, IoD, Mr. Thomas Awagu, said the institute was aware that there were enormous challenges confronting the country.

However, he said that it was necessary that these challenges were harnessed to grow investments and help create jobs in the country.

Lamenting the high cost of doing business in Nigeria, Awagu said the situation had brought to the fore the need to reposition Nigeria, making it competitive in the global economic landscape.

He said: “There are enormous challenges confronting us today as a nation. These challenges include insecurity, corruption, poor infrastructure and unemployment, amongst others. Nonetheless, we at the IoD Nigeria believe that a lot of hope exists for the nation to realize its potentials and be transformed to its desired status, given the nation’s inherent potentials and resources.

“It is our conviction that the afore-mentioned challenges present a need for us as citizens and friends of Nigeria to explore ways of making our country more competitive on the global scene and attract necessary investments and create jobs.”

Awagu emphasised the need for the creation of an enabling environment and significant investment in economic infrastructure, saying these would help in addressing the current challenges confronting the country, help promote competitiveness and fast-track sustainable economic growth and development.

He further predicted a growth in the Nigerian economy and in the country’s ranking on the ease of doing business if the on-going transformation programme and infrastructure building projects are pursued vigorously and maintained.

Key among the projects that would drive the growth of the Nigerian economy, he said, include the Independent Power Projects (IPP) and on-going roads construction among others.

“In line with the mission of the IoD and as part of our efforts toward working with the government and relevant stakeholders to address the above-mentioned challenges, with a view to enhancing the reform efforts on the different sectors of the economy and facilitating the implementation of the National transformation agenda, vis-a-vis the realisation of the country’s vision 2020 objectives, the IoD Nigeria has scheduled to hold its maiden Convention, with the theme: ‘Good Governance for Business Sustainability,” he said.

According to him, the event is structured to bring together key players from corporate Nigeria, global delegations, the organised private sector, entrepreneurs, public sector officials and other relevant stakeholders to review achievements; identify and discuss constraints to progress; agree on issues that need immediate response; and decide on how all stakeholders can effectively contribute towards addressing identified gaps.

“The event is designed to have the President and Commander-in-Chief of the Armed Forces of the Federal Republic of Nigeria, Dr. Goodluck Ebele Jonathan, as the Special Guest of Honour - to deliver the keynote address. More so, the Director-General of the IoD, United Kingdom, Mr. Simon Walker, is expected to be in attendance to deliver the goodwill message among others,” Awagu said.

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