Equities Rebound on Unveiling of Market Makers

09 Apr 2012

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NSE DG, Oscar Onyema

By Goddy Egene and Eromosele Abiodun 
Despite the fact that the Nigerian equities market opened for only four days last week, investors had something to smile about the market made a huge turnaround on the back of declining interbank rates and the expected influx of liquidity following the unveiling of market makers by the Nigerian Stock Exchange (NSE).

The market opened for four days during the week due to the two-day public holidays declared by the Federal Government of Nigeria to mark the Easter celebrations.

The market had the previous week performed poorly as investors migrate to stocks of companies in the real sector as a result of the less-than-expected year end result released by some banks.

Trading last Monday resumed on a poor note as investors suffers hangover from the previous week’s disappointment in banks year end results. But the market took a different direction the next day as news hit the market that some banks have released excellent Q1 results.

The renewed momentum was sustained at the close of business last Thursday by the introduction of market makers the previous day.

Consequently, the exchange’s benchmark All-share Index or ASI appreciated by 289.46 points or 1.40 per cent to close on Thursday at 20,941.93 while the market capitalisation of the 187 Main Board equities increased from N6.549 trillion to N6.641 trillion.

Also, the NSE-30 Index appreciated by 17.35 points or 1.85 per cent to close at 956.19 points. The previous week, the NSE-ASI and the NSE-30 Index had depreciated by 2.5 per cent and 3.45 per cent, respectively.

Two of the four sectoral indices appreciated during the week compared to one during the preceding week. While the NSE Insurance Index went up by 1.64 points or 1.32 per cent to close at 125.92 points,  the NSE Banking Index appreciated by 9.93 points or 3.51 per cent to close at 292.97 points.

However, the NSE Consumer Goods Index declined by 6.29 points or 0.37 per cent to close at 1,701.75 points and the NSE Oil/Gas depreciated by 3.32 points or 1.66 per cent to close at 196.64 points.

A cursory look at the exchange’s trading statistics revealed that investors sold a total of 1.149 billion ordinary shares worth N7.796 billion made in 15,027 deals, in contrast to a total of 1.442 billion shares valued at N11.5 billion exchanged the previous week in 18,849 deals.

The Financial Services sector accounted for 857.99 million shares valued at N4.94 billion traded in 8,856 deals. The Natural Resources sector followed with 70.547 million shares valued at N35.54 million traded in 13 deals. The previous week the Financial Services sector led on the activity chart and was followed by the Consumer Goods sector.

However, the banking subsector of the Financial Services sector was the most active during the week (measured by turnover volume) with 738.97 million shares worth N4.87 billion exchanged by investors in 8,450 deals. The volume of shares sold in the banking subsector was largely driven by activity in the shares of Diamond Bank Plc, Guaranty Trust Bank Plc and Zenith Bank Plc. Trading in the shares of the three banks accounted for 417.2 million shares, representing 56.46 per cent, 48.63 per cent and 36.30 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 66.26 million shares valued at N33.5 million traded in 212 deals.

The banking subsector had the previous week led on the activity chart and was followed by the Insurance subsector.

Also traded during the week were 30 units of NewGold Exchange Traded Products (ETFs) valued at N76,290.00 exchanged in 5 deals. 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 28 equities that appreciated in price during the week, higher than the 25 of the preceding week. Mobil Oil Plc led on the gainers’ table with a gain of N13.33 or 10.05 per cent to close at N146.00 per share while Okomu Oil Palm Plc followed with a gain of N5.49 or 19.60 per cent to close at N33.50 per share.

Other price gainers’ in the Top 10 category include: Dangote Cement Plc (N2.70), Unilever Nigeria Plc (N2.39), CAP Plc (N1.50), Nestle Nigeria Plc (N1.20), Guaranty Trust Bank Plc (N1.01), UACN Plc (N1.00), Zenith Bank Plc (76 kobo) and Ecobank Transnational Incorporated Plc (69 kobo). On the other hand, 34 stocks depreciated in price, lower than the 39 of the preceding week. Guinness Nigeria Plc led on the price losers’ table, dropping by N9.70 or (4.04 per cent) to close at N230.14 per share while Oando Plc followed with a loss of N3.01 or (13.68 per cent) to close at N19.00 per share. Other price losers in the Top 10 category include: GlaxoSmithKline Consumer Plc (N2.03), Cadbury Nigeria Plc (N1.79), Lafarge WAPCO Plc (N1.00), NCR(Nigeria) Plc 68 kobo), Ashaka Cement Plc (63 kobo), National Salt Company Nigeria Plc (60 kobo), Presco Plc (59 kobo), Nigerian Aviation Handling Company Plc (4 kobo).
Market Makers Unveiled
Meanwhile, as part of its efforts to bring back liquidity and depth into the Nigerian stock market, the management of the NSE during the week under review announced the names of 10 market makers with a promise to unveil more.

THISDAY had reported that barring any last minute change, the exchange would unveil the 10 market makers last week. However, final clearance from the Securities and Exchange Commission (SEC) and other issues were said to have delayed the announcement till this week.

Unveiling the market makers, the Chief Executive Officer (CEO) of the NSE, Mr. Oscar Onyeama, who clocked one year in office last week, said it was a major landmark.

“This is a great milestone and a major step in the direction of turning the market round to have liquidity and depth back into the market. We will continue to move forward on this,” he said.

The 10 stockbroking firms, which were selected from a list of 20 that applied include: Stanbic IBTC; Renaissance Capital Limited; Future View Securities Limited; Vetiva Capital Limited; ESS/Dunn Loren Merrifield, WSTC Financial Services Limited; Capital Bancorp Limited; FBN Securities Limited; Greenwich Securities Limited and CSL Stockbrokers Limited.

“The companies selected went through a very rigorous process and met the minimum net capital requirement of N570 million. We also examined their compliance history and looked into their operational capabilities including their technology and processes.”
According to him, firms were taken through trainings, debated the appropriate market structure to be used while the exchange further went through the approval of the SEC in the selection process.

The 10 market makers were also allowed to the select a basket of quoted companies in which they would provide the desired level of liquidity via a draw.

Market makers provide liquidity to securities through provision of bid and offer prices in the trading system of a stock exchange. They ensure a fair and orderly market in their securities of responsibility and assist in the effective functioning of the overall market.
Oil Firms Telcos Set For NSE
Also, the number of listed companies on the main board of the NSE is expected to swell in the weeks ahead as top players in the oil and gas, telecommunication sectors of the Nigerian economy have indicated interest to list on the Exchange.

Head of Listing and Retention of the NSE, Mrs. Tarba Peterside, told THISDAY at a news briefing last week that the exchange has received firm commitment to list from oil and gas and telecommunication firms since the introduction of its new listing rules.
THISDAY also reliably gathered that the NSE had a dinner with major telecommunication companies in Lagos last week where it further cemented their planned listing on the NSE.

Peterside added that four sectors were major priority in its quest to attract new companies to the NSE adding that the NSE received confirmation from 20 companies that will list on the Exchange this year.

She said: “We are also getting in touch with a number of companies, explaining to them the value proposition of being listed on the NSE. To find out how we can bring them to participate in the market, to help them create wealth and have access to proper capital formation. 

“There are so many things we can do and are already doing to attract companies to come to the market. We are building a strong pipeline and really, the decision as to when a company comes to the market is dependent on the company. Companies look for market conditions that are perceived as being favourable to them. Our job is to make sure that the pipeline is reached and when they are ready they get listed.”

Among the new criteria for listing (on the Alternative 1 segment) is a cumulative consolidated pre-tax profit of at-least N300 million for at least three years (as against five years before), with a pre-tax profit of at least N100 million in two of those years.

Also, companies willing to list on the exchange henceforth must have been in operation for three years, three years financials and date of last audited accounts must not be more than nine months.

Another notable change to the exchange rules is the clause that mandates promoters and key stakeholders to retain 50 per cent of shares pre-Initial Public Offering (IPO) for 12 months.

Additionally, companies wishing to list on the Alternative 1 market must be registered as a public limited, liability company under the provisions of the Companies and Allied Matters Act (CAMA), must migrate to the International Financial Reporting Standard (IFRS) and its securities must be fully paid up at time of allotment in line with the Securities and Exchange Commission (SEC) requirements for minimum threshold for a successful offer.

On the other hand, companies wishing to list on the main board must have a cumulative consolidated pre-tax profit of at-least N600 million within one or two years, three-year operating track record of, company and/or core investor.

Companies wishing to list on the main board are also required to have three years financials and (date of last audited accounts must not be more than nine months) or evidence of strong technical partner with substantial equity and involvement in management.

The NSE had recently embarked on a number of new initiatives, including: reinvigorating business development in order to achieve a market capitalisation of one trillion dollars in five years; paying more attention to rule drafting and interpretation for market participants; aggressively pursuing the listing of privatised government entities and significant corporations in different sectors; reviewing the current market segmentation to be more reflective of global industry classifications as well as increasing market accessibility to attract greater foreign participation, among others.

A fundamental requirement to drive these initiatives is a set of listings rules that are attractive to quality issuers on both the Main Board and the Alternative Securities Market (ASeM).

Oscar Onyema had said that the NSE embarked on reviewing the listings rules because some of the stakeholders of the Exchange assert that the listings rules of are inflexible.

According to Onyema, “The requirement that companies must have a five-year financial and operating track record has been cited as hindrance to many companies that would have been listed on the Exchange.
Capital Market Reforms
In another development, stakeholders in the nation’s economy and the financial service sector during the week under review, called on the Federal Government to replicate the reforms made in the banking sector in the nation’s capital market and other sectors as way of accelerating the growth of Nigerian economy.

The call forms part of the recommendations made by participants at the Rivers State Investors Forum held late last year in Port Harcourt.

The forum was organised and packaged by a group of private investors and professionals.
Speakers and panellists focused attention on agriculture, rural development, infrastructural development (emphasis on power and roads) oil and gas, services (emphasis) on finance among others.

In a communiqué issued at the end of the forum, the participants said every effort should be made by the government to ensure that the reforms in the banking sector were replicated in the capital market and other sectors where it is applicable.

“The long-term infrastructure finance be sought from and provided by the capital market, so as to secure project continuity and reduce the incidence of abandoned projects,” they said.

According to them, where public borrowing is found necessary to supplement monthly allocations from the Federation Account, States Houses of Assembly should ensure that funds obtained thereby were properly applied to projects which add significant value to the lives of the citizens of the state.

“The Federal and State governments should ensure that a modern and transparent system of accounting and audit is introduced and duly put in place so as to curb corruption and lug leakages in the system. There must also be discipline, transparency and accountability in project implementation,” they said.

On the infrastructure, which is considered key to the growth of the economy, the communiqué noted that every effort should be made by the federal government to accelerate the implementation  its power sector reform programme.

“Private entrepreneurs should be allowed to invest in the extension of gas pipelines in the order to accelerate the expansion of the emerging national grid. The Federal Government owned power generation and distribution companies be speedily privatised and liberalised and monopoly currently held by the Power Holding Company of Nigeria be dismantled,” they said.

On Rivers State, the participants said the necessary reforms be put in place to ensure that tax regimes were dully harmonised and the incidence of illegal/multiple taxation is totally eliminated.

“There must be constructive engagement between the Federal Government and the Rivers State government to ensure the maximum utilization of sea ports and airports within Rivers State and its environs,” they said.

They also urged the Rivers State   to take steps to ensure that an enterprise culture be engendered among the indigenes of the state and accordingly, technical and vocational training and education should be given the required emphasis.

“A one-stop shop for investors should be established in Port Harcourt to replicate what the Nigerian Investment Promotion Commission has in Abuja,” they said.
Access Bank
In the meantime, Access Bank Plc, last week come tops in the Financial Transparency Index (FTI) based on combined risk management and corporate governance disclosures in their financial reports for the year ended December 2010.

The financial transparency study was conducted on the 2010 financial reports of banks quoted on the Nigerian Stock Exchange by Source Capital Research in collaboration with BusinessDay Media.

The report, which shows how much information the banks provide to the public in both risk management and corporate governance practices has been released and it showed that Stanbic IBTC Bank came second behind Access Bank.

Fourteen listed banks were analysed by the research team at Source Capital. According to the report, when a combination of the overall level of corporate governance and risk management disclosure by the banks was analysed and ranked, Access Bank, Stanbic IBTC Bank, First City Monument Bank Plc, Ecobank Bank Plc and Guaranty Trust Bank were the top five.

Access Bank scored 4.64 points  out of 5.0; Stanbic IBTC (4.5); First City Monument Bank  (3.37), Ecobank (2.98), and Guaranty Trust Bank  (2.86).

They were followed by  Diamond Bank (2.75), Zenith Bank (2.45), Fidelity Bank  (2.31); Skye Bank (2.29); Wema Bank (2.03); First Bank of Nigeria(1.94); Sterling Bank (1.91); Unity Bank (1.07); United Bank for Africa Plc (1.01).

Tags: Nigeria, Business, Featured, Oscar Onyema

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