Bargain Hunting in Bellwethers Halts Three-week Decline

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Goddy Egene

 A late rally on the back of bargain hunting in bellwethers assisted in halting a three-week losing streak  at the stock market last week, with the Nigerian Stock Exchange (NSE) All-Share Index appreciating by 0.39 per cent to close at 29,966.87. Gains in stocks such as Guaranty Trust Bank Plc, Nestle Nigeria Plc and Nigerian Breweries Plc, led to the recovery witnessed in the last week of June. Consequently, the market shed 3.55 per cent in June and 4.6 per cent in the first half of the year. A look at the daily performance of the market showed that it commenced on  a bearish note on Monday with a decline of 0.14 per cent. The negative trend continued on Tuesday and Wednesday as the ASI dipped 0. 47 per cent and 0.20 per cent respectively. But the market rebounded on Thursday with a gain of 0.47 per cent and consolidated the growth with 0.73 per cent on Friday.

Performance across sector was bullish as four  of the five sectors closed on a positive note. The NSE Consumer Goods Index led with a gain of  3.2 per cent, while the NSE Oil & Gas Index trailed with 0.7 per cent. The NSE Industrial Goods Index rallied 0.6 per cent, just as the  NSE Banking Index garnered 0.2 per cent. Conversely, the NSE Insurance Index shed 1.5 per cent.

Market turnover

Meanwhile, investors traded  1.771 billion shares worth N28.036 billion in 18,660 deals  during the week under review compared with 7.476 billion shares valued at N91.107 billion that exchanged hands  the previous week in 17,192 deals. 

 The Financial Services sector led the activity chart with 1.336 billion shares valued at N17.894 billion traded in 8,783 deals, thus contributing 75.4 per cent and 63.8 per cent to the total equity turnover volume and value respectively. The Consumer Goods sector followed with 115.835 million shares worth N5.282 billion in 2,969 deals. The third place was Industrial Goods industry with a turnover of 90.705 million shares worth N1.707 billion in 1,991 deals.    Trading in the top three equities namely, Zenith Bank Plc, Guaranty Trust Bank Plc and Wema Bank Plc accounted for 840.903 million shares worth N15.266 billion in 2,938 deals. Also, a total of 505,460 units valued at N39.278 million were traded last week in 27 deals compared with a total of 662 units valued at N990,530.00 that was transacted two weeks ago in four deals.

A total of 47,212 units of Federal Government Bonds valued at N49.976 million were traded   in 34 deals compared with a total of 21,682 units valued at N22.552 million transacted preceding week in 29 deals.

Meanwhile, the  Chief Executive Officer of the NSE, Mr. Oscar Onyema, was last week optimistic that  the plan by Central Bank of Nigeria (CBN) to raise the capital base of commercial banks above the N25 billion minimum level will be beneficial to the market.

He  said the NSE was studying the pronouncement by the CBN so as to know what the banking sector regulator intends to achieve.

CBN Governor, Mr. Godwin Emefiele, while announcing the plan to recapitalise  the banks, had said the 2004 banking industry recapitalisation, which increased banks’ capital base from N2 billion to the current N25 billion, had weakened.

He said: “You will all agree with me that it was Governor Soludo in 2004 that did the last recapitalisation we had, moving the capitalisation from N2 billion to N25 billion.

“And I must commend those efforts because it resulted in positioning Nigerian banks not only in Africa, but also being among the banks in the world in terms of capitalisation and it also increases or helps to strengthen the banking industry capacity to take on large ticket transactions- and those are some of the things we badly need today.

“And if you relate N25 billion in 2004 exchange rate, which was about N100 to N25 billion, it is certainly only about $200 million. Today, if we relate N25 billion at N360, you can see that it is substantially even lower than $75 million. What we are trying to say is that recapitalisation has weakened quite substantially and there is a need for us to say it is time to recapitalise Nigerian banks again.”

Commenting on the plan by the CBN, Onyema said: “We are still studying the pronouncement that was made yesterday, so we are not quite sure what it means. But what I can say is that historically if you look at the last big recapitalization efforts for the banking sector, the capital market was greatly used for raising the financing and indeed it was very beneficial to the capital market to the extent that the market became more sophisticated and a lot more players came into the market from the investors perspective.”

According to the NSE boss, the financial sub-sector on the NSE remains one of the most liquid sectors listed on the stock exchange. “So, we know that potentially, it could be very beneficial to the capital market. So, we are studying it and we intend to engage and see how we can serve as a trusted partner in implementing that recapitalisation whenever it comes,” he added.

Similarly, the Chief Executive Officer, Rand Merchant Bank Nigeria/Regional Head, RMB West Africa, Mr. Michael Larbie,  welcomed the move by the central bank, saying that a bank is just as strong as its balance sheet.

According to Larbie, the capacity of a financial institution to lend to industries and other sectors would be  dependent on the capital they have.

“I think stronger and well capitalised banks would be good for the economy. And the important thing is clear, being big is one thing, but having the right assets and industries to lend to, sensibly, where you don’t have accumulated non-performing loans (NPLs), is really going to be the balancing that we need to have.

“Really, providers of capital expect to get a return on the capital. So, return on capital is going to be very important and I think it is something that our industry, collectively working with the Governor and the people at the CBN need to find what the optimal answer is.

“But I have no doubt that well-capitalised banks is certainly good for the economy and no doubt if those capital raised are deployed prudently, then it can go a long way in creating more industry giants to support the economy,” the RMB Nigeria boss added.

 

Price gainers and losers

The price movement  chart showed that 36  equities appreciated higher than 34  in the previous week, while 32 depreciated, lower than 33 equities in the previous week. Champion Breweries Plc led the price gainers with 19.0 per cent, trailed by Consolidated Hallmark Insurance Plc with 18.1 per cent. Mutual Benefits Assurance Plc chalked 15 per cent, just as Associated Bus Company Plc and UAC of Nigeria Plc gained 11.1 per cent and 9.9 per cent respectively.

B.O.C. Gases Plc  garnered 9.5 per cent, while  International Breweries Plc, Courtville Business Solutions Plc, Ikeja Hotels Plc and Glaxosmithkline Consumer Nigeria Plc  appreciated by 9.5 per cent, 9.5 per cent, 9.1 per cent, and 9.0 per cent respectively.

On the negative side, NPF Microfinance Bank Plc led the price losers with 19.2 per cent, followed by NEM Insurance Plc with a decline of 18.9 per cent. Forte Oil Plc shed 14.1 per cent, while Beta Glass Plc and Sterling Bank Plc  went down by 9.9 per cent and 9.0 per cent in that order.

Dangote Sugar Refinery Plc and Unity Bank Plc shed 8.4 per cent each. Prestige Assurance Plc dipped by  7.4 per cent, just as Chams Plc and FBN Holdings Plc lost 6.4 per cent apiece.