Profit-taking, Delayed FX Policy Plod Stock Market’s Momentum

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By Goddy Egene and Eromosele Abiodun

 
The Nigerian equities market last week returned to negative territory on the back of massive drive by anxious investors to book profits following record gains in recent days.

The negative trend was also affected by the delay in  release of the modus operandi of the proposed flexibility in the foreign exchange market and the renderings from the democracy day speech.

The bulls were unable to overcome the bears until the last two trading days of the week, an effort that could not stop the market from closing in the red.

The first two trading days of the week were volatile driven by bellwether stocks including Dangote Cement Plc, Nigerian Breweries Plc and Zenith Bank Plc.

At the close of trades for the week, the Nigerian Stock Exchange All-Share Index (ASI) and market capitalisation depreciated by 4.39 per cent to close the week at 27,634.42 and N9.491 trillion respectively. Similarly, all other Indices finished lower during the week.

 It was a four-day trading week as the Federal Government of Nigeria declared Monday 30th May, 2016 as Public Holiday to commemorate “Democracy day.”

The bulls had dominated the market the previous week following the Central Bank of Nigeria’s (CBN’s) announcement that it would adopt a more flexible exchange rate policy. Consequently, the NSE ASI crossed the 28,000 points level the previous Wednesday, the first time since the 5th of January this year.

Meanwhile, traders believe last week’s negative performance may be short-lived as investors rush to take position for possible gains.

“We expect the market to stabilize on expectation of opportunistic buying from discerning investors taking advantage of the depressed price level in some stocks. We however highlight that macro issues ranging from delayed announcement of the framework for a flexible fx regime, as well the country’s fragile fiscal position will continue to weigh on market performance. As such, we advise investors to build position in quality names for a medium to longer term horizon,” analysts at Investment One Limited said.

Daily Performance Summary

The market had commenced on a poor note last Monday as profit-taking by investors drove the NSE ASI to a negative close. The benchmark index shed 4.29 per cent to end the session at 27,663.16 points, corresponding to a market capitalisation of N9.5 trillion. The day’s outcome was largely influenced by losses in market bellwether stocks including Dangote Cement Plc, Nigerian Breweries Plc and Zenith Bank Plc, which cancelled out gains in ETRANZACT Plc, Glaxo Smithkline Plc and Continental Reinsurance Plc. Similarly, major sub-sector indices ended the session in the red. While the banking sector declined by 6.67 per cent, Industrial (5.5 per cent), Consumer Goods (2.79 per cent) as well as Oil and Gas (2.39 per cent). Despite the prevailing bearish sentiment, market turnover strengthened by 12 per cent as investors staked N3.15 billion on over 335 million units of stocks in 4,301 deals. The volume chart was led by banking tracker accounting for over 80 per cent of total trade with largest volume of trade recorded in the duo of Fidelity Bank Plc (75 million units) and FBN Holdings (70 million units).

The NSE ASI suffered another loss on Wednesday, shedding 2.72 per cent as investors maintained a bearish outlook on stocks. As such, the benchmark indicator ended the session at 26,910.23 points and a market capitalisation of N9.24 trillion. The decline in Nigerian Breweries Plc, Guinness Nigeria Plc, Lafarge Africa Plc, were largely to blame for the day’s performance, offsetting positive momentum towards the likes of Cadbury Nigeria Plc and Okomu Oil Palm Plc. The banking tracker was down 6.86 per cent largely on the back of a 9.70 per cent decline in Stanbic IBTC Plc, and a 9.21 per cent loss in Zenith Bank Plc. Similarly, Consumer Goods index fell 2.68 per cent due to a bearish sentiment towards Nigerian Breweries Plc (4.96 per cent) and Flour Mills of Nigeria Plc (4.80 per cent) while the Industrial tracker was down 1.48 per cent, dragged by over four per cent loss in Lafarge Africa Plc. Volume of trades came in flattish, while value traded rose by 12 per cent, relative to the previous day’s session. As such, investors exchanged over 336 million units of stocks, worth N3.5 billion in 5,024 deals.

Gains in Industrial (2.7 per cent), Consumer Goods (1.46 per cent) and Banking (0.52 per cent) tickers lifted the NSE ASI by 1.02 per cent at the end of the trading session, halting the bearish trend of the previous two days. The benchmark indicator strengthened by 273.41 points to settle at 27,183.64 points, with market capitalisation rising by N94 billion to berth at N9.34 trillion. Cement and breweries tickers including Dangote Cement Plc, WAPCO Plc and Nigerian Breweries Plc were the main drivers of the day’s rally in the index, offsetting bearish sentiments toward the likes of Nestle Nigeria Plc Seplat Plc and Forte Oil Plc. Despite the positive momentum, market turnover declined by over 39 per cent as investors exchanged 332million units of stocks worth N2.16 billion in 4,167 deals. A further breakdown of activities indicated that UBA Plc and FCMB Plc were the most traded stocks with over 93 million and 40 million units each.

The equities market ended the week on a positive note with the NSE-ASI closing up by 1.66 per cent. The positive close in the index was largely influenced by the gains in Forte Oil Plc, Guinness Nigeria Plc and Lafarge Africa  Plc which cancelled out the bearish sentiments attracted by the likes of Mobil Oil Nigeria Plc and Dangote Cement Plc. Consequently, the benchmark indicators strengthened by 450.78 points to end the session at 27,634.48 points while market capitalisation climbed by N155 billion to dock at N9.49 trillion. All the major sub-sector indices closed in the green. 

 

 

Market Turnover

During the week under review, a turnover of 1.263 billion shares worth N11.583 billion in 17,434 deals were traded by investors in contrast to a total of 2.338 billion shares valued at N14.789 billion that exchanged hands the previous week in 24,942 deals.

The Financial Services Industry dominated the activity chart with 1.024 billion shares valued at N5.983 billion traded in 10,686 deals, thus contributing 81.07 per cent and 51.65 per cent to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 83.240 million shares worth N3.595 billion in 2,650 deals. The third place was occupied by the Conglomerates Industry with a turnover of 74.979 million shares worth N121.593 million in 715 deals.

Trading in the Top Three Equities namely – United Bank For Africa Plc, FBN Holdings Plc and Zenith International Bank Plc.(measured by volume) accounted for 418.707 million shares worth N2.858 billion in 4,405 deals, contributing 33.14 per cent and 24.68 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 6,500 units of Exchange Traded Products (ETPs) valued at N117,637.20 executed in 24 deals, compared with a total of 537,969 units valued at N56.655 million transacted the prior week in 43 deals.

 

Gainers and Losers

Meanwhile, only 12 equities appreciated in price during the week, compared with 56 equities of the previous week. Sixty equities depreciated in price, higher than 20 equities of the previous week, while 108 equities remained unchanged higher than 104 equities of the previous week.

 Cadbury Nigeria Plc led with N3.65, followed by PZ Cussons Plc with N1.08. Other top gainers included: Okomu Oil Plc (N1.03), E-Tranzact Plc (87 kobo), Trans Nationwide Plc (21 kobo), Union Dicon Plc (56 kobo), Portland Paints Plc (nine kobo), Academy Press (three kobo), Cutix Plc (seven kobo) and Learn Africa Plc (three kobo).

Conversely, the top 10 losers were: UAC Nigeria Plc (N1.90), Stanbic IBTC Plc (N1.96), Zenith Bank Plc (N1.63), ETI Plc (N1.62), Oando Plc (N1.43), Neimeth Plc (14 kobo), AXA Mansard  Insurance Plc (32 kobo), Honeywell Plc (19 kobo), CCNN Plc (76 kobo) and NAHCO (51 kobo).