NSE Trading Session
By Goddy Egene and Eromosele Abiodun
Investors in the Nigerian equities market again had something to smile about last week as the market sustained the renewed momentum that started the previous week, lifting stock prices to a seven-month high.
The market had the previous week started a bull run as investor confidence gradually returned to the market on the back of the strong first quarter results released by almost all the banks and increased liquidity following the introduction of market makers.
Trading had last Monday resumed from where it stopped the previous week and continued on that note till midweek, it moved further north on Thursday as the bulls held sway of transactions with the help of petroleum stocks, which, continued their impressive run.
Stocks however, reverted downwards at the close of business last Friday as the bears decided the outcome of the last trading day of the week to halt eight consecutive days of bullish activity.
Despite last Friday’s setback, most market indices closed the week firmer led by the twin market performance indicators, the NSE All-share Index or ASI and the market capitalisation.
Analysis of trading numbers released by the Nigerian Stock Exchange (NSE) revealed that the exchange’s benchmark Index appreciated by 352.94 points or 1.62 per cent to close on Friday at 22,109.44 while the market capitalisation of the 187 main board equities appreciated from N6.938 trillion to N 7.051 trillion.
Also, the NSE-30 Index, which mirrors the 30 most capitalised stocks appreciated by 12.59 points or 1.26 per cent to close at 1008.52.The previous week, the NSE-ASI and the NSE-30 Index appreciated by 4.89 per cent and 5.08 per cent, respectively.
Three of the four sectoral indices appreciated during the week compared to two during the preceding week. While the NSE Consumer Goods Index appreciated by 23.46 points or 1.33 per cent to close at 1,787.72, the NSE Banking Index went up by 5.78 points or 1.84 per cent to close at 319.73. In the same vein, the NSE Oil/Gas Index grew by 13.19 points or 7.35 per cent to close at 192.53. However, the NSE Insurance Index depreciated by 0.77 points or 0.61 per cent to close at 124.94.
A further analysis of the NSE numbers showed that investors sold a total of 1.916 billion ordinary shares worth N16.664 billion made in 23,143 deals, in contrast to a total of 2.049 billion ordinary shares valued at N15.736 billion exchanged the previous week in 19,783 deals. The Financial Services sector accounted for 1.655 billion shares valued at N12.013 billion traded in 14,561 deals while the Consumer Goods Sector followed with 113.365 million shares valued at N3.552 billion traded in 4,009 deals. The previous week, the Financial Services sector led on the activity chart and was followed by the Consumer Goods sector.
The banking subsector of the Financial Services sector was the most active during the week (measured by turnover volume) with 1.520 billion shares worth N11.940 billion exchanged by investors in 13,265 deals. The volume of shares sold in the banking subsector was largely driven by activity in the shares of United Bank for Africa Plc, Zenith Bank Plc and First Bank of Nigeria Plc. Trading in the shares of the three banks accounted for 875.54 million shares, representing 57.59 per cent, 52.91 per cent and 45.69 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 activity in the shares of AIICO Insurance Plc, followed on the week’s activity chart with a subsector turnover of 47.755 million shares valued at N23.918 million traded in 532 deals. The previous week, the banking subsector led on the activity chart and was followed by the insurance carriers, brokers and services subsector.
Also traded during the week were 121 units of NewGold Exchange Traded Products (ETFs) valued at N303,730.00 exchanged in 4 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 35 equities that appreciated in price during the week, higher than the thirty-three (33) of the preceding week. Mobil Oil Nigeria Plc led on the gainers’ table with a gain of N13.53 or 10.24 per cent to close at N145.60 per share while Flour Mills Nigeria Plc followed with a gain of N5.00 or 9.26 per cent to close at N59.00 per share. Other price gainers’ in the Top 10 category include: Conoil Plc (N4.50), NCR (Nigeria) Plc (N3.23), Cadbury Nig. Plc (N3.10), Dangote Cement Plc (N2.02), Ashaka Cement Plc (N1.80), Guinness Nigeria Plc (N1.78), Lafarge Wapco Plc (91 kobo) and Nigerian Breweries Plc (90 kobo).
On the other hand, 26 stocks depreciated in price, lower than the 34 of the preceding week. CAP Plc led on the price losers’ table, dropping by N2.99 or (11.33per cent) to close at N23.40 per share while GlaxoSmithKline Consumer Nigeria Plc followed with a loss of N1.20 or (5.85per cent) to close at N19.30 per share. Other price losers in the Top 10 category include: Unilever Nigeria Plc (41 kobo), Total Nigeria Plc (39 kobo), Portland Paints & Products Plc (37 kobo), Eterna Plc (34 kobo), P Z Cussons Nigeria Plc (33 kobo), Stanbic IBTC Bank Plc (30 kobo), FCMB Plc (28 kobo) and Dangote Flour Mills Plc (25 kobo).
NSE Trading Platform
Meanwhile, the new trading platform of the Nigerian Stock Exchange (NSE)-NASDAQ X-Stream-will become operational by second quarter of 2013.
Speaking at the contract signing ceremony for the platform with officials of NASDAQ OMX in Lagos, the CEO of the NSE, Mr. Oscar Onyema, said the deal signified a milestone in the effort of the exchange to upgrade its current trading platform, Horizon, to the cutting-edge NASDAQ X-Stream.
According to him, the new platform is a high performance, robust and scalable, multi-asset, multi-market matching trading engine, noting that the NSE and officials of NASDAQ OMX would work together to ensure that the platform is deployed in Q2 of 2013.
He said: “The new trading platform will enable the NSE have the fastest trading engine in Africa and investors, through their stockbrokers, will have real-time access to market prices, their portfolios and be enabled to execute market orders in near real-time from anywhere and on a wide range of devices including smart phones.”
Onyema noted that the new system would improve transparency and provide efficient price discovery in the market, among other benefits, stressing that investors in the market would benefit significantly from the system upgrade as it would afford them the opportunity to diversify their investment portfolio.
“With this new system, equities, a fully functional bond market and Exchange Traded Funds ( ETFs) will be accommodated in phase one of the projects while derivatives will be introduced in the second phase. The system will also enable the NSE to host other exchanges,” he promised.
Speaking in the same vein, the Executive Director, Market Operations and Technology (MOT) of the exchange, Mr. Adeolu Bajomo, explained that the process of selecting the new trading platform was rigorous.
“We undertook a detailed and robust evaluation process that culminated in the selection of NASDAQ OMX X-Stream, a system currently used by over 94 exchanges around the world and reputed to be one of the leading trading platforms in the market,” he said.
Vice-Chairman of NASDAQ OMX, Mr. Sandy Frucher, and President, Market Technology of the company, Mr. Lars Ottersgard, signed on behalf of NASDAQ while Onyema and Bajomo, signed on behalf of NSE witnessed by many council members of the exchange, including the former Interim Administrator, Mr. Emmanuel Ikazoboh.
Meanwhile, trading continued on the bullish note as the NSE All-share Index rose by 0.53 per cent to close at 21,895.41, while market capitalisation added N37 billion to close at N6.983 trillion.
Twenty-nine equities added value led by Mobil Oil Nigeria Plc with N6.60, while 13 equities declined in value led by PZ Cussons Nigeria Plc with N0.26.
The new trading system, NASDAQ X-Stream to be acquired by the Nigerian Stock Exchange (NSE)from the multinational financial services powerhouse, NASDAQ OMX, may cost the Exchange about N1.4 billion THISDAY checks have revealed.
As part of its desire to upgrade its trading platform, The NSE had invited business proposals from vendors. NASDAQ OMX and two other global exchanges, responded to exchange’s
The exchange during the tenure of Mr. Emmanuel Ikazoboh as the Interim administrator, settled for NASDAQ OMX X-Stream trading system, which is said to be used by over 20 exchanges around the world.
While the management of the NSE will be signing the contract for the trading system with NASDAQ OMX in Lagos tomorrow, competent market sources close to the deal told THISDAY that it would cost the Nigerian bourse about N1.4 billion to get the trading system.
Executive Director, Market Operations and Technology (MOT) of the Exchange, Mr. Adeolu Bajomo, had last week explained that the exchange and NASDAQ OMX performed a joint design study between September and November 2010 and in July 2011, covering requirements, project timeline and risks system components; servers and connectivity; installation, training, testing and go live support among other issues.
Speaking on the project objectives, Bajomo noted that the X-stream would replace the current trading system, Horizon.
“Equities and fully functional Bond Market, and Exchange Traded Funds (ETFs) will come in phase one and the introduction of Derivatives to The Exchange will come in the second phase.”
According to him, implementation of a new trading platform is one of the key cornerstones in delivering the full potential of our market, affording the Exchange the tools to deliver target of five products in five years, scale up its services for growth and enhance the investor experience of doing business in the Nigerian capital market.
“The new system will also improve transparency and provide efficient price discovery. The platform, will among others, enable investors, through their brokers to have real-time access to market prices, their portfolios and execute market orders in near real-time from anywhere and on a wide range of devices including smart phones,” he said.
Senior Vice-President, NASDAQ OMX Market Technology, Lars Ottersgard, was recently quoted to have said that the latest edition of the X-stream technology matches orders in under 100 millionths of a second.
According to him, built on support business growth, X-stream is a proven multi-asset trading solution that combines exceptional performance and rich functionality with unparalleled flexibility and adaptability. X-stream’s flexible architecture is a powerful tool that enables marketplaces to grow and adapt as their business grows and requirements change.
ACT Begs FG for Capital Market
In a bid to get the equities market to where it was in 2008, the Association of Corporate Trustees (ACT), last week, called for the injection of funds into the Nigerian capital market by the Federal Government as a way of bailing it out from its poor state.
The trustees made the call in their presentation to the House of Representatives Ad Hoc Committee conducting a public hearing on the near collapse of the Nigerian capital market in Abuja.
Trustees provide investor protection services, secured credit administration, supervision and monitoring of fund managers and issuers to ensure compliance with regulatory obligations. They play a vital role in maintaining a safe market structure for investment activities in the bond and collective investment segments of the market.
Making the presentation on behalf of other members, President of ACT, Mrs. Oluwatoyin Sanni, said: “Clearly, injection of funds is required to shore up prices and lift the capital market from its present very low depth. Responding to the financial meltdown afflicting every facet of business in Nigeria, the issue for determination at this juncture is whether short, medium and long term palliative measures are sufficient to uplift the Nigerian capital market. As with the money market, through AMCON, we believe there is a need for government intervention to salvage the Nigerian capital market.”
According to her, the intervention measures by the government could be in short or long term.
She said such measures were largely crafted and put in place by the various governments and the regulators.
“This implies that the Nigerian Federal Government and its various organs have a huge role to play in the recovery of the Nigeria capital market taking a cue from what obtains in global environment,” she added.
Under the short-term measures, the trustees said the government engaged in direct purchase of shares on the Nigerian Stock Exchange (NSE) and a bail-out for real and manufacturing sectors of the economy.
Explaining the direct purchase of shares on the NSE, the trustees said the government wished to utilise a Special Purpose Vehicle (SPV) or use the Ministry of Finance Incorporated to commence buying of shares on the NSE.
“When these shares are purchased, they will serve twin purposes – being investment for the government which it can hold, earn returns and later resell on one hand and increase the demand segment of the capital market leading to market recovery.
“On the other hand, it is estimated that the sum of N800 billion will suffice as the chain effect will trigger other purchase mandates as investor confidence heightens, following the upward movement of both the market capitalisation and the NSE All-Share Index. This measure which was adopted in the United States of America after the 1987 crash helped to cut out programme trading and save the American market,” Sanni said.
Justifying their call for the government intervention, Sanni explained that for each of the past global crashes, government played major roles in ensuring economic recovery.
“During the Tulip and bulb crash (1634 – 1637) in Holland, government stepped in to halt the crash by offering to honour contracts at 10 per cent of the face value. Lately in the 2007 to 2009 credit crunch (US Subprime Mortgage Crisis) which affected global economy, the US Federal Reserve Bank and Reserve Banks around the world took steps to expand money supply to avoid the risk of a deflationary spiral in which lower wages and higher unemployment lead to a self-reinforcing decline in global consumption.
“Interest rates were cut by central banks globally to help borrowers. In addition, the US Federal Reserve bank injected fresh funds to the tune of $2.5 trillion into the market by buying up the debt of private and government agencies. The governments of European nations and the US also raised the capital of their national banking systems. Governments bailed out several firms incurring large obligations,” she said.
Speaking on the bail-out for the real sector of the economy, ACT boss, who is also the Chief Executive Officer, Trustees/Global Investor Services, United Bank for Africa Plc, said many of the listed companies were suffering from the effect of the global economic crisis.
“Investors in the Nigerian capital market as at end of January 2012 have lost more than N9 trillion. It is not only banks that can benefit from bailouts. Many of the listed companies in the real and manufacturing sectors are suffering from the effect of global economic crash and their fortunes and consequently investor fortunes would be boosted by government aid to achieve recovery as was done by the US government,” she said.
Regarding the long-term measures, Sanni said a consistent and determined fight against corruption would elevate our nation and make our market more attractive to the world.
“Rapid installation of world class market infrastructure, commencing with market wide Straight-through Processing as have been done in advanced and even smaller neighbouring economies which are wholly electronic. For example, the West African Economic and Monetary Union, headquartered in Cote D’Ivoire. Enthrone transparency/checks and balances in line with global standards of best practices,” she said.
According to her, the market should be broaden through the acceleration of process of commencement of new products like securities lending will aid liquidity and boost activities level.
“Regulatory synergy/synchronisation between the different arms of the financial system is an imperative for sustained growth of the capital market. Regular workshop with the various stakeholders of the capital market-relevant governmental departments who perform capital market related functions. Market education and investors awareness/sensitisation as to the opportunities and risks of the market is crucial. Recapitalisation and consolidation of market operators to ensure economic strength, capacity and to eliminate fragmentation, thus aiding effective regulation,” she declared.
LSE Support Nigerian Economy
In another development, the London Stock Exchange (LSE) during the week under review said it would support companies operating in the power and other infrastructural sectors of the Nigerian economy with the provision of funds needed to successfully executive such projects.
This was stated by Mr. Richard Webster-Smith, who is responsible for the LSE’s Primary Markets business development activities in the Americas, South Asia, Middle East and Africa, in an interview with THISDAY in Lagos.
The Federal Government’s efforts in transforming the power and energy sectors of the economy is expected to lead to the establishment of many companies in the generation, distribution and transmission of electricity power.
Considering the huge capital requirements there are apprehensions that companies wishing to play in the sectors may face the challenge of funding.
But speaking with THISDAY, Webster-Smith said the LSE would be an ideal place for such companies to raise the required funds.
According to him, the London markets have been used to raise sizeable amounts of investment funds for developing power generation projects in emerging markets.
“The example of India highlights how, with the right regulatory framework in place, investors in London have an appetite for direct investment in the power sector in high growth economies. We believe with recent regulatory developments here in Nigeria, the sector is becoming more appealing to international investors and international equity financing could be a key part of meeting Nigeria's power requirements,” he said.
Webster-Smith, who was in Nigeria to discuss prospects of firms operating in the country to list on the LSE, said that London was unmatched in terms of the availability of international capital to fund the needs of companies from all round the world.
“International equity funds under management in London alone are estimated at $1.3 trillion. Hence the LSE is the most international of all the world’s stock exchanges, with around 3,000 companies from over 70 countries admitted to trading on its markets,” he said.
As part of efforts to assist Nigerian firms access funds on the international capital markets, he said the LSE had established a d working relationship with the Nigerian Stock Exchange (NSE) and Securities and Exchange Commission (SEC) in terms of sharing information and experiences.
He added that they all also worked jointly to promote the development of the Nigerian capital market through the annual Nigeria Capital Markets Forum in partnership with NSE, JP Morgan and Thomson Reuters.
On the prospects of Nigerian firms successfully raising funds on the LSE, Webster-Smith said many African firms including those from Nigeria had successfully accessed the international capital markets via their LSE.
According to him, since 2008, Africa-focused companies listed on the LSE have raised over £4.18 billion in new and further issues in the market. In 2011(alone), a total of 11 Africa-focused companies joined the LSE, raising a total of £272.65million on admission.