Daily Independent (Lagos)
Kingsley Ighomwenghian
11 November 2008
One week after the Nigerian Stock Exchange (NSE) removed the artificial bumps put in the way of its All-Share-Index to stem the lingering meltdown, the index seemed to have hit a natural bottom of 33,754.11 basis points last Wednesday.
When compared with last year's closing level of 57,990.22 points, the market had lost all of 24,236.11 points, representing a decline of 41.79 per cent to date, wiping off a substantial portion of last year's cumulative 74.73 per cent growth that made the NSE one of the celebrated examples among the emerging markets within the year. It was not just the index that was down by mid-last week, as equities capitalisation fell from N10.18 trillion at the end of last year by N2.776 trillion or 27.26 per cent. From the historic high of N12.64 trillion and 66,371.20 points, the NSE indicators have so far lost a minimum of about N5.236 trillion and 49.14 per cent respectively. This could be significantly more when the various supplementary and new issues, including those of various banks and other highcapped stocks so far listed are factored into the equation.
By last mid-week, the fear was no long about how far from the last year end level the index had descended, but how close it was to the 33,189.30 points closing figure on Friday December 29, 2005 figure. Indeed, the index could have hit the 2005 end figure if the decline had lingered further till the end of last week.
On Thursday and Friday, the equities' capitalisation recovered about N131.121 billion, while the index rose 597.70 points or 1.77 per cent, closing at 34,351.81 points.
Analysts at UBA Global Market Limited noted last week that the decision of the NSE to remove the circuit breakers actually produced the desired result as shown in the market rebounded "having shed 18.94 per cent since the downward limit on share prices was reversed last Tuesday."
Others noted the continued strong momentum, as could be seen from the number of stocks closing on bid, just as there was a marginal increase in the index. This is aside from the phenomenal reduction in the number of stocks on the laggards' side of the price movement table, all of which confirm the gradual return of liquidity to the market as well as investors confidence.
Not knowing sure of the extent of the current rally, equities' analysts were quick to caution their clients on the need "to seek investment opportunities that are supported by strong fundamentals," as against the herd mentality or bandwagon that got many into the messy from which they are yet to recover.
There are those who believe that the market may not have bottomed out, as the two-day reprieve could, after all, be just a flash in the pan judging by the fast approaching Christmas and New Year festivities that are expected to by joined by yet another Muslim holiday in December. The festive season is known to lead to sell downs in the equities' market, in followed in January by the need to pay school fees, among others.
By the time the market bottomed out on Wednesday, whether temporarily or not, 19 stocks, among which were many banking stocks, including Afribank Nigeria, First City Monument Bank and May & Baker had hit a new 52-week low, while Hallmark Paper Products achieved a new year high of 309 kobo each. Most of these stocks had hit their two-year low.
Among those that were trading below their year end December 2006 level included owners and managers of oil palm estates and rubber plantations located in Edo and Delta states- Okomu Oil Palm, which closed at N32.79 per share, down from N34.05 at the end of 2006. Last Wednesday's was, however, not its floor for the past year, as it had fallen to a 52-week low of N21.80 This was also true of Nigerian Aviation Handling Company (NAHCo), which at N10.39 last weekend was already N2.06 down from its N12.45 closing price at the end of December 2006, the year it was listed on the NSE.
The banking sub-sector was, however, not spared by the hurricane, as Diamond Bank at N6.80 last Wednesday had gone below even its N7.75 closing price at the end of December 30, 2005. Even when it recovered some flesh in the last two days of last week when it closed at N7.47, it was not enough to push it to positive territory or help it over the 2006 level, but was just enough to ensure it surpassed the 2006 year end figure. Perhaps, comparatively, Diamond Bank fared better than its older and bigger competitor, First Bank of Nigeria, whose N20.16 closing price mid-last week (few days after hitting a new two-year low of N19.10 per share), was a far cry from N32.00 and N33.50 closing prices at the end of 2005 and 2006 respectively. So far this year, the NSE Daily Official List recorded that First Bank has in the last 52 weeks achieved a height of N54.86, just as the bank's directors offered a share split in 2006, following which it offered one new share for every five for the year ended March 31, 2008. By last weekend, First Bank's share price rose N2.05 each, following the submission of its un-audited result for the half year ended September 30, 2008 indicating that gross earnings stood at N96.974 billion. This represented an increase of about N30.439 billion or 45.76 per cent, compared with previous half year's N66.508 billion. The directors also reported pre-tax profit of about N30.048 billion, up by N10.716 billion or 55.43 per cent from N19.332 billion in the preceding second quarter. Meanwhile profit attributable to shareholders jumped by N8.499 billion or 55.65 per cent to N23.771 billion compared with N15.272 billion reported in the corresponding second quarter of last year.
Others that continue to hope for the sustenance of the rebound if they are to record positive returns on investment or even close flat by year end include Guaranty Trust Bank, which at N12.54, mid last week was almost N6.00 down from the 2006 level of N18.15, in addition to being 14 kobo away from the 2005 closing figure, making it one of the biggest casualty also of the meltdown. Intercontinental Bank fared slightly better, falling to N14.63, just within earshot of its N13.60 closing level at the end of December 2006, while Oceanic Bank International was not as lucky at N11.76, after falling below the 2006 end figure of N15.34 per share.
Another heavy casualty in the banking sub-sector was the United Bank for Africa, whose share price closed last Wednesday at N14.93 as it paced fast towards the December 2005 level of N13.00 before came in the next two days. Compared to the 2006 year end price, UBA was down by N10.38 or 41.01 per cent.
One stock, many believe has not hit its support level is Union Bank of Nigeria, which closed at N25.56 last Wednesday, but fell further to N23.08 by weekend, as it moved closer to its N22.91 per share level at the end of 2006, but farther away from the N25.48 price at the end of previous year. Union Bank had been saved from bottoming out so far, it is believed, because of the initial plans by its directors to shop for an unprecedented N300.6 billion from the primary market through an offer by way of rights to existing shareholders and the public. The offer was postponed after what analysts believe is a correct reading of the signs pointing to the fact that the market was in no mood for primary market offering when the share of comparable stocks could be obtained at a better premium without having to wait for allotment.
According to the original plan, the management of Union Bank explained that the capital raising exercise is in a bid to enable it play more significant role in the economy, especially in this age of public-private sector partnership for the financing of the nation's moribund infrastructure, necessary for the country to remain competitive and become one of the biggest 20 economies and a financial hub for the sub-Saharan Africa by the year 2020. Specifically, the amount was to enable Union Bank finance branch network expansion including opening more off-shore subsidiaries, while further upgrading its information technology infrastructure to deliver quality services while ensuring sustainable development leading to improved earnings, returns and capital appreciation. This is aside from enhancing working capital, which is considered key to the quantum of financial intermediation role any bank can play in the economy, while increasing the bank's participation in the real sector of the economy particularly oil and gas, aviation, telecommunication, agriculture, infrastructure and refinery, among others. Announcing the postponement to top media executives in his office, Group Managing Director and chief executive of the bank Bartholomew Ebong also blamed the postponement on the global financial crisis.
By the end of last Wednesday, Zenith Bank had fallen to N21.47, a level below the 2006 end figure of N24.40 per share.
The two dominant stocks in the breweries sub-sector, just like others, also had a dose of the meltdown, with Guinness Nigeria as the most severely affected dropping to N73.96 at the end of mid-last week's session, up from N107.99 at the end of 2006, or even the N96 per share level at the end of 2005. Nigerian Breweries fared slightly better, as it dropped to N32.55, from its height of N55.90 from N37.25 at the end of 2006 and N38.80 a year earlier.
In the building materials sub-sector, Ashaka Cement and its sister company Lafarge WAPCO were the worst hit. While Ashaka fell from N55.00 at the end of 2006 to last Wednesday's N26.62, which was even less than N34.20 in the comparable period of 2005; Lafarge WAPCO fell to N27.33 from N53.99. Fellow building materials making giant- Cement Company of Northern Nigeria at N11.99 last Wednesday fell from a high of N24.50, aside from dropping from last year end's N21.57. CCNN has however not benefited from the recent rebound as it closed last weekend at N10.83 each, nearer to the 2005 year end level of N7.95 per share.
The deluge has not been so far pronounced in the food beverages and confectioneries sub-sector where Flour Mills of Nigeria has so far suffered a decline of over N10, falling to N54.08 from N64.85 at the end of 2006. Northern Nigeria Flour Mills fell to N21.36 from N26.60 at the end of 2006, just while Nestle Nigeria lost almost N10 also, closing at N225.43 from N235.00 per share at the end of 2006.
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