Michael Eboh & Providence Obuh
19 November 2008
THE bullish trend in the Nigerian capital market was halted yesterday as investors took advantage of the upsurge in the prices of some stocks leading to a drop in the value of listed equities in the Nigerian Stock Exchange (NSE) by N33.83 billion.
Specifically, the market capitalisation which opened at N8.39 trillion dipped by 0.40 per cent to close at N8.36 trillion. Another of the market indices, the All-share index, also dipped by 0.40 per cent to close at 37,865.16 points from 38,018.44 points at which it opened.
Investors who bought some of the stocks at their rock bottom prices during the meltdown may have decided to sell off the stocks to take advantage of the improvements recorded in the last 13 days.
The stocks of First Bank of Nigeria Plc, the flagship of the banking stocks, dropped to as low as N19.10 per share, while a number of other stocks also hit significant low points before the rally began.
Today, majority of the stocks, especially stocks in the Banking, Breweries and Food and Beverages sub-sectors have recorded significant appreciation, leading to investors' decision to take advantage of the appreciation, by selling their shares.
According to an investor, Mr. Boniface Okezie, President Progressive Shareholders Association of Nigeria (PSAN), "The drop in the market indices is as a result of some investors' decision to dispose off some of their shares because of the rise in the prices of stocks that has been recorded in the last couple of days.
This is a reflection of the fact that confidence has not been totally restored in the market. Investors who are not certain of what will happen in the next moment would decide to sell off some of the shares they bought during the meltdown, now that the prices have started to rally."
A stockbroker, Mr. Amaeze Olisaemeka had, last week, expressed concern about the current market rally. He said it might not be sustained if adequate measures were not put in place by the relevant authorities to forestall a recurrence, especially as majority of the banks were seriously affected by the market downturn.
He said: "I have my fears about the current market rally. This is because of the fact that the exposure of banks to margin facilities in the capital market is enormous. I believe it is in excess of N1 trillion. My fear is that as the market recovers gradually, the banks might decide to sell.
The refusal of the Central Bank of Nigeria (CBN) to prevail on banks to restructure their margin facilities to market operators will seriously hamper the growth of the market in the near future. If this issue is not addressed on time, I am afraid, there might be problems in the market, because the banks will soon start foreclosing on the properties of the market operators and this will bring back the bearish trend."
Also, the drop in the market indices was occasioned by heavy losses on the share prices of some of the blue chip companies, with Chevron Oil Nigeria Plc recording the highest share price loss, dropping by N13.35 to close at N253.65 per share from N267.00 per share; Oando Plc followed with a loss of N5.65 to close at N107.42 per share and Nigerian Breweries Plc dipped by N2.28 to close at 43.32 per share.
Other share price losers include: Seven-Up Bottling Company- N2.18; Benue Cement Company Plc- N1.l59; First Bank of Nigeria Plc- N1.45; Ashaka Cement Plc- N1.40; Zenith Bank Plc- N1.34; Northern Nigerian Flour Mills Plc- N1.06; GTBank Plc- N0.83 among others.
However, UAC Nigeria Plc recorded the highest share price gain, rising by N1.20 to close at N33.20 per share, UAC Property Development Company Plc followed with a gain of N1.20 to close at N26.00 per share and Dangote Sugar Refinery Plc garnered N0.98 to close at N20.77 per share.
Driven by activities in the Banking and Insurance sub-sectors, equity trading on the NSE appreciated by 26.96 per cent. Particularly, a turnover of 633.76 million shares valued at N5.55 billion was recorded in 11,435 deals, in contrast to the previous day's turnover of 499.19 million shares valued at N6.08 billion in 11,444 deals.
The Banking sub-sector dominated the other sub-sectors, accounting for 49.2 per cent of the market turnover with 311.75 million shares valued at N4.33 billion in 7,218 deals. The Insurance sub-sector followed, accounting for 39.67 per cent of the market turnover with 252.02 million shares valued at N325.30 million in 1,478 deals.
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