Stock brokers in session
By Goddy Egene and Eromosele Abiodun
The Nigerian equities market sustained its positive run last week following the take-off of market-making activity in the market, which fuelled the drive by bargain hunters to position for possible future gains.
The market had the previous week recorded massive gains following increased inflow of funds from foreign investors and renewed interest by domestic institutional investors and pension funds administrators (PFAs).
However, the commencement of market-making with 16 securities assisted to sustain the positive performance last week.
Trading resumed last Monday on a positive note like it did the previous week and extended the bullish run to the close of business last Thursday. Although some investors attempted profit taking on Friday, which led to a margin decline last Friday, the market ended the week on a positive note.
Analysis of trading results released by the Nigerian Stock Exchange (NSE) showed that the exchange’s benchmark All-Share Index (ASI) appreciated by 2.12 per cent to close at 25,873.71 up from 25,337.18 points. The year-to-date return of the ASI stood at 24.81 per cent as at last Friday.
Also, the market capitalisation of the listed equities rose by 2.14 per cent or N172.568 billion, from N8.066 trillion recorded in the preceding week to N8.238 trillion.
All the NSE sectoral indices appreciated: the NSE 30, NSE Consumer Goods, NSE Banking, NSE Insurance, NSE Oil/Gas and NSE-Lotus II rose by 1.77 per cent, 1.85 per cent, 0.79 per cent, 7.02 per cent, 0.67 per cent and 2.79 per cent respectively.
In all, investors sold a total of 2.695 billion ordinary shares worth N15.701 billion made in 24,717 deals in contrast to a total of 2.224 billion ordinary shares valued at N14.252 billion exchanged hands the previous week in 24,108 deals.
The financial services sector was the most active during the week contributing 84.15 per cent to the total turnover volume with 2.268 billion shares valued at N11.689 billion exchanged by investors in 14,366 deals.
The volume of shares sold in the sector was largely driven by banking and insurance carriers, brokers and services subsectors led by shares of First City Monument Bank Plc, Unic Insurance Plc, and Zenith Bank Plc. Trading in the shares of the three companies accounted for 928.311 million shares, representing 40.94 per cent and 34.45 per cent of the volume recorded by the sector and total turnover for the week respectively.
Also traded during the week were 4,700 units of NewGold Exchange Traded Funds (ETFs) valued at N12.770 million exchanged hands in 10 deals in contrast to a total of 7,873 units valued at N21.075 million transacted last week in 13 deals. However, there were no transactions in the Federal Government Development Stocks, State/Local Government Bonds, and Corporate Bonds/Debentures sectors.
Gainers and Losers
The price movement chart of the NSE displayed a total of 56 equities that appreciated in prices during the week, higher than 40 of the preceding week. Lafarge Cement WAPCO Nigeria Plc led on the gainers table with a gain of N4.99 per cent to close at N54.99 per share. Other top gainers include Flour Mills Nigeria Plc (N4.72), U A C of Nigeria Plc (N4.21), Nigerian Breweries Plc (N2.50),
Nestle Nigeria Plc (N2.50), Union Bank of Nigeria Plc (N1.95), Okomu Oil Palm Plc (N1.80), UACN Property Development Company Plc (N1.62), Dangote Cement Plc (N1.26) and Cadbury Nigeria Plc (N1.19).
Conversely, 16 stocks depreciated in prices lower than 29 of the preceding week. Arbico Plc led on the losers’ table with a loss of N0.5 per cent to close N9.88 per share. Other top losers included: Beta Glass Company Plc (N0.50 ), Morison Industries Plc (N0.28 ), CAP Plc (N0.25 ), Learn Africa Plc (N0.10 ), Nigerian Aviation Handling Company Plc (N0.08 ), Livestock Feeds Plc and United Bank for Africa Plc (N0.07), McNichols Plc and A.G. Leventis Nigeria Plc ( N0.05 apiece).
Apart from the market-making that began with 16 equities last week, which impacted positively on the market, analysts at Renaissance Capital, said the downward pressure on yields in fixed income securities was also a good omen for the equities market.
“This is positive for equity markets, in our view. The NSE All-Share Index is up more than 20 per cent this year, making it one of the top-performing African markets (along with Egypt and Kenya). However most of the performance has been driven by offshore buyers, with less activity from domestic investors,” they said.
They explained that data from the NSE indicated that offshore investors accounted for 80 per cent of trading activity in 2011.
“We estimate that the figure has been even higher year-to-date. For local investors, we would argue the trade-off between high-yielding risk-free assets versus equity markets has not been sufficiently compelling to drive a significant shift in portfolio allocations. In our view, this is set to change as yields decline. We have already seen it in Kenya, where the swift correction in yields this year has resulted in renewed local demand for equities, which in turn has helped drive the market further upwards,” they said.
PFAs to Increase Patronage
Meanwhile, there are hopes that the capital market might heading for more bullish activities going by the words of the Director-General of National Pension Commission (PenCom), Mr. Mohammad Ahmad, that pension funds administrators(PFAs), would increase their patronage of the market is anything to go by.
Ahmad had stated that several initiatives by the management of the NSE aimed at repositioning the exchange and make the stock market more attractive, would increase PFAs patronage.
The pension assets in the country stood at N1.5 trillion as at June 2012 and PFAs, which manage these assets, are required by law to invest maximum of 25 per cent in the stock market. However, most of the PFAs do not hit this benchmark given the poor state of the capital market in recent times.
But speaking to newsmen last week in Lagos, Ahmad, said the stock market would witness more patronage from PFAs considering the initiatives by the current management of the exchange to deepen the market and strengthen corporate governance.
“PFAs have not drawn down their investments in the equities market. The 25 per cent limit still exists. They only limited their level of patronage because of issue of corporate governance both from the perspective of operators and listed companies. But with the initiatives of current management of the exchange, we believe the issues of corporate governance is being addressed and this will definitely affect the patronage going forward,” Ahmad said.
The PenCom boss, who spoke on the side-line of a conference on market-making, securities lending and short selling organised by the NSE, said with the commencement of market-making in the Nigerian equities market, he said the issue of liquidity would likely to be addressed.
Apart from the introduction of market-making, the NSE had last year re-classified the various sectors to ease investment decision-making and increase investment knowledge and enhance strategic portfolio construction. Besides, the reporting level has been improved upon as companies are now made to provide adequate information and data while filling in their quarter financial results and other corporate actions.
The latest development is the market-making, which the Chief Executive Officer of the exchange, Mr. Oscar Onyema, said would enhance the liquidity and depth of the second largest market in sub-Saharan Africa.
Head, Transformation and Change, NSE, Mr. Olumide Lala, had explained that market makers would a central role in the provision of two-way quotes (comprising buy and sell prices) for the securities that they are making markets on.
“Leveraging the securities lending process, market makers will be able to borrow securities in order to settle ‘buy order imbalances’ from customers. A ‘hybrid’ market, allowing both market makers to provide two way quotes and licensed broker/dealers of exchange to submit orders as is currently done, will be operated from the commencement date of this key initiative,” he said.