NE DG, Oscar Onyema

By Goddy Egene and Eromosele Abiodun

Investors in the Nigerian equities market again smiled home last week as the stock market ended the week with a record performance. For the first time in recent times, the market posted a weekly gain of 4.5 per cent following a strong demand for stocks in the fast moving consumer goods sector and renewed confidence in the banking sector.

The market, in the previous week for August ending, closed on a positive note helped by a sustained decline in government debt yields, which led to shift in equities throughout the week.

Trading last Monday resumed on a positive note and extended the positive run the next day. On Wednesday, The Nigerian Stock Exchange (NSE) benchmark index hit a 59 week high, crossing the 24,000 point level, its highest since July 13, 2011, when it closed at 24,410 points. It continued on that note till the close of business last Friday. Consequently, all the major market indicators ended the week firmer led by the twin market gauge.

Analysis of trading  market statistics  showed that the NSE All-Share Index or ASI appreciated by 4.58 per cent to close on Friday at 24,838.70. Similarly, market capitalisation which opened at N7.56 trillion, appreciated by 4.59 per cent to close at N7.91 trillion. As at last Friday, the year-to-date (YTD) growth of the ASI stood at 19.82 per cent.

Apart from the ASI, all the six sectoral indices appreciated. For instance,  the NSE -30, the NSE Consumer Goods, the NSE Banking, the NSE Insurance, the NSE Oil/Gas and the NSE-Lotus II  rose to 4.68 per cent, 3, 98 per cent, 7.10 per cent, 0.02 per cent, 1.49 per cent and 3.63 per cent respectively.

Analysts believe the equities market would sustain the bull run in the coming week as investors seek value in fundamentally strong stocks on the back of dwindling yields in the fixed income market. “However, there would be pockets of profit taking in the coming week,” noted a report by FSDH Securities Limited

A further analysis of the market’s trading results showed that investors sold a total of 3.468 billion ordinary shares worth N23.994 billion made in 21,542 deals, in contrast to a total of 1.461 billion shares valued at N10.142 billion that exchanged hands the previous week in 20,322 deals.

The financial services sector was the major driver contributing 92.05 per cent to turnover with 3.193 billion shares valued at N20.138 billion exchanging hands in 12,659 deals. Similarly, the banking subsector of the financial services sector was the most active during the week (measured by turnover volume), with 3.091 billion shares worth N20.059 billion traded in 11,979 deals.
The volume of shares sold in the banking subsector was largely driven by shares of Union Bank Nigeria Plc, United Bank for Africa Plc and First Bank of Nigeria  Plc. Trading in the shares of the three banks accounted for 2.520 billion shares, representing 81.54 per cent, 78.93 per cent and 72.66 per cent of the turnover recorded by the subsector and total turnover for the week, respectively.

Also traded during the week were 23,727 units of NewGold Exchange Traded Funds (ETFs) valued at N61.738 million which exchanged hands in 16 deals, in contrast to a total of 3,997 units valued at N10.164 million traded last week in 17 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 showed that 50 equities appreciated last week, higher than 43 in the preceding week. Flour Mills Plc led on the gainers’ chart with a gain of N8.39 to close at N61.89 per share.  Nigeria Breweries Plc  followed with a gain of N4.50 to close at N127.50 per share. Other price gainers in the top 10 category included: Cadbury Nigeria Plc (N4.15), Okomu Oil Palm Plc (N3.50) Mobil Oil Nigeria Plc (N2.99), Dangote Cement Plc (N2.88), International Breweries Plc (N2.26), Unilever Nigeria Plc (N2.10), Ashaka Cement Plc (N2.05), Julius Berger Nigeria Plc (N1.83).

Conversely, 15 stocks depreciated in prices lower than 26 of the preceding week. Arbico Plc led on the price losers’ chart, dropping by N1.80 to close at N10.93 per share.  Morison Industries Plc trailed with a loss of  N0.64  to close at N6.04 per share.

Other  top price losers included: Guinness Nigeria Plc ( N0.50 , Paints and Coating Manufacturers Plc (N019 ), University Press Plc and U T C Nigeria Plc (N0.15 ), Transnational Corporation of Nigeria (N0.13), Presco Plc (N0.10), DN Meyer Plc (N0.07), Cutix Plc (N0.06).

Market-making

Meanwhile, the Nigerian equities market may continue its positive run in the months ahead if the planned take-off of market making activities materialise. Following the announcement of the names of market makers on the trading floor of the Nigerian Stock Exchange (NSE) in the second quarter of this year, the NSE management said last week that market-making programme would commence on September 18, 2012.

As part of activities heralding the kick-off of the market making initiative, the NSE has concluded arrangements to facilitate a workshop to intimate stakeholders with the rules and operational guidelines on the initiative.

Market making is a situation where special types of stockbrokers hold a certain number of shares in their inventory for the express purpose of selling them to bidders at a future date. Offering an insight into the initiative, Head, Transformation and Change of the NSE, Mr Olumide Lala, explained that the market makers would play 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 the exchange to submit orders as is currently done, will be operated from the commencement date of this key initiative,” he said.
Rationalising the importance of securities lending in market making, Lala said that it would pave the way for lending and borrowing of securities, which in turn would enable investors earn returns on their idle stocks whilst contributing significantly to market liquidity and price efficiency through legitimate investment activity in covered short selling.

The NSE had in the second quarter of 2012, announced the names of its market makers following a rigorous selection process. The unveiling of the 10 broker/dealer firms selected as market makers was described by the Chief Executive Officer of the exchange, Mr Oscar Onyema, as a major landmark in enhancing the liquidity and depth of the second largest market in sub-Saharan Africa.