Insurance Stocks Defy Bearish Trading at Stock Market

Goddy Egene
Investors in Regency Assurance Plc, Consolidated Hallmark Insurance Plc and Royal Exchange Plc experienced growth in their investments last week despite the domination of trading by the bears at the stock market. Although the Nigerian Exchange Limited’s (NGX) All-Share Index (ASI) declined for the second consecutive week due to bearish trading, the three stocks fetched their holders significant gains.

For instance, Regency Assurance Plc led with 44.1 per cent, trailed by CHI Plc with 43.1 per cent. Also, Royal Exchange Plc appreciated by 30.6 per cent.
In all, 32 stocks appreciated, while 30 stocks depreciated. At the close trading last week, the NGX ASI fell 0.18 per cent to close lower at 38,256.95, while market capitalisation ended at N19.94 trillion.

Also, the volume and value of trading declined as investors exchanged 1.037 billion shares worth N9.471 billion in 17,577 deals, compared with 1.048 billion shares valued at N11.543 billion that exchanged hands in 17,233 deals the previous week.

However, the Financial Services Industry remained the most active with 687.623 million shares valued at N5.659 billion traded in 9,506deals; thus contributing 66.2 per cent and 59.7 per cent to the total equity turnover volume and value respectively.

The Conglomerates Industry followed with 106.138million shares worth N545.020million in 1,146 deals, while the third place was ICT Industry occupied the third position with 84.310 million shares worth N350.698 million in 604 deals.

Trading in the top three equities namely Zenith Bank Plc, Guaranty Trust Bank Plc and Fidelity Bank Plc accounted for 229.453million shares worth N4.281 billion in 3,634deals.

The market has been recording lower patronage recently as foreign investors continue to stay away. This development led to the total value of foreign investors hitting a four-low last month.

“We highlight that the total value of foreign involvement in April is the lowest in four years (April 2017: N22.45 billion), which we believe was induced by rising bond yields in the advanced economies amidst lingering foreign exchange illiquidity in the country.

“Meanwhile, the weak domestic participation was driven by a 66.4 per cent month on month (m/m) decline in retail investor’s participation which masked the 20.3 per cent m/m increase in institutional investors’ participation,” analysts at Cordros Securities said.

The analysts said they maintained their expectation of weak domestic and foreign investors’ participation on the local bourse in the near term due to sustained rise in yields in the fixed income space and lingering liquidity constraints in the foreign exchange (FX) market.

Looking at this week, they said they still expect a choppy theme with the bears dominating proceedings in the absence of positive triggers to spur a bullish performance.
“Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the fragility of the macroeconomic environment remains a significant headwind for corporate earnings,” they said.

The Central Bank of Nigeria’s Monetary Policy Committee resolved to retain the Monetary Policy Rate (MPR) otherwise known as interest rate at 11.5 per cent. The MPC also voted to maintain the asymmetric corridor of +100/-700 basis points around the MPR and left the Cash Reserve Ratio at 27.5 per cent and Liquidity Ratio at 30 per cent.
The MPR is the rate at which the CBN lends to commercial banks and often determines the cost of borrowing in the economy.

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