Equities' analysts and traders were agreed at the weekend that this week may see investors still hungry for returns and realising the need to cut their losses, baring their fangs. So far, the twin basic indicators have recorded robust jumps, with the All-Share-Index at 23,226.28 basis points and equities capitalisation at N5.593 trillion, representing year-to-date growth of 11.52 per cent and 12.11 per cent respectively, the difference being from new and supplementary listings so far this year.

Analysts noted also at the weekend that Nigerian equities since the beginning of the year "have displayed outstanding performance in just 25 trading days rising from 20,827 points as at the end of 2009 to above 23,000 mark by February 5, 2010". This is coming shortly after investors started taking stock of the losses in 2008 and 2009 when the index slumped 45 per cent and 34 per cent down, after a bull-run that spanned the previous 40 juicy months. Within the period, the NSE index jumped 74 per cent up, becoming the world's best performing, thereby attracting all manner of investors- both local and international portfolio managers.

Last week's gain would have been better than the cumulative 631.38 points or 2.79 per cent notch, but for Friday's slide, believed to have heralded another season of profit taking, after seven days of growth. If the NSE had closed the week at Thursday year-high of 23,848.03 points, year-to-date growth would have been 3,020.86 points or 14.50 per cent.

According to analysts at Meristem Securities Limited at the weekend, the year-to-date performance of the NSE index brings it into the league of global leader- Egypt (Cairo's SE Gen), which at the end of trading on February 4, 2009, recorded year-to-date growth of 13.14 per cent.

Both Nigeria and Egypt, according to FSDH Securities are being trailed by Ghana with 1.37 per cent rise at the close of trading on Thursday, February 4, 2010, when Nigeria garnered 14.49 per cent cumulatively since January 2, compared the 4.87 per cent loss by South Africa's JSE All-Share-Index.

That means, of the 17 indices across America, Europe, Asia and Africa, captured within the period by FSDH, only four closed in positive territories.

The report notes that while the Dow Jones Industrial Average (US) lost 4.08 per cent; the S & P 500 (US) shed 4.66 per cent; NASDAQ, 6.33 per cent; Bovespa Index (Brazil), 1.96 per cent, after the week's 6.63 per cent gain. Europe's major benchmark FTSE 100 Index (London) fell by 5.05 per cent; CAC 40 Index (France), 6.28 per cent; DAX index (Germany), 7.12 per cent; and Spain's SMSI, 14.31 per cent.

As at last weekend, continued meristemng.com, "emerging market equities are yet to find their feet in 2010 having shed some six per cent from the huge recovery experienced in 2009, Nigerian equities have taken the bold step outperforming Brazil by 26 per cent and South Africa by 20 per cent".

The company links the rise so far to twin factors of crashing money market rates, which now supports influx of cash into the equities' market, and the possibility of foreign portfolio investors rushing back into the Nigerian market to take position in anticipation of a kill in the coming months.

The meristemng.com explains that "on the average, the liquidity position of the banking system has improved significantly and the hitherto high rates for money market instruments are getting less and less attractive for fund managers and portfolio builders. For instance, some high flying small-cap stocks like Red Star Express Staco Insurance, Union Dicon Salt, Fidson Healthcare and Cement Company of Northern Nigeria currently command dividend yields that compete favorably with money market rates. This trend has engineered capital re-allocation domestically much in favour of equities whose prices are perceived to be depressed. However, when the level of domestic liquidity capacity is placed in the perspective of the current market size and the level of turnover, it is obvious that there is more liquidity support for the current market uptrend than just domestic capital re-allocation.

"Though up-to-date data on the level of foreign investment portfolios and the proportion of such in daily market turnover is still a hard statistics to come by in Nigerian capital market, unlike the level of disclosure obtainable in key emerging economies and some frontier markets, emerging trends and the upsurge in market liquidity suggest a magnitude that is much beyond what domestic capacity can provide."

No More Irrational Exuberance

The impending profit taking session, some analysts believe follows from a resolve by most traders and investors that the era of irrational exuberance or sentiments is over, giving way for a return of the age of investing on the basis of hard facts and "today's price for tomorrow's value," or the future expectations from any particular stock.

It would be recalled that Lance Musa Elakama, Assistant Director-General of the Nigerian Stock Exchange (NSE), had while delivering his year-end message to the stock broking and investment community on December 31, 2009, challenged all to return to the old practice of seeing equities' investment as taking calculated risk, rather than a mere casino or gaming machine that it was turned to in the days leading to the boom year.

Stock broking, he noted, is "not a gamble, it is not casino, it is not betting, which all depend on luck or ill-luck. Stock broking is taking calculated risks. Stockbrokers must start to look at basic fundamentals more than market sentiments. You must do your home work before deciding to buy or sell any securities. You must know the companies and their management well. You must know the company's products, its market share, its prospects and other macro variables before taking a calculated risk," he admonished the brokers.

Continuing, Elakama stressed that the era where a particular stock will just be skyrocketing daily, especially just before a primary market action or initial public offering, is over.

The ADG warned that stock broking is not practiced as in the popular "Alaba (international) market" for electronics and household products, but a market where city gentlemen ply their trade as well trained conservative professionals".

Like the legendary Warren Buffet, the NSE boss asked investors and stockbrokers not just to buy stocks without thorough analysis of the company's fundamentals; a factor that makes Buffet, popularly known as the Oracle of Omaha (U.S.A.), to be known as a value-investor. This requires a lot of patience, he said, just as he expressed hope that this year would be one of hope, urging them to look for opportunities from challenging situations that present themselves currently.

"I know that hope works in various ways; it looks for the good in people and situations, instead of harping on the worst; it discovers what can be done instead of grumbling about what cannot; it regards problems, large or small, as opportunities; it pushes ahead when it would be easy to quit; it "lights the candle" instead of "cursing the darkness," he stressed.

Biggest Gainers

Between last year-end and last weekend, according to analysis by cashcraft.com and meristemng.com, small capped stocks led on the recovery path, especially some of the banks recently rescued by the Central Bank of Nigeria (CBN).

According to the analysts, Spring Bank took the lead, closing at 140 kobo per share, representing 84.21 per cent jump from its level at the beginning of the year; followed by Capital Hotel's 80.43 per cent; while Ibadan, Oyo State based FTN Cocoa Processor closed 65.38 per cent better during the period, helped by expectations for its full year result for the year ended December 31, 2009, due for release soon. Within the period, Bank PHB notched 58.33 per cent; Costain (WA), 56.58 per cent; Finbank, 50.94 per cent; Associated Bus Company, 44.74 per cent; Livestock Feeds, 40.35 per cent; and Skye Bank, 40.07 per cent.

Middle-level capped stocks that recorded some flesh over the period included Ashaka Cement with 29.52 per cent; Unilever Nigeria, 29.73 per cent; while United Bank for Africa, 26.67 per cent; Access Bank notched 20 per cent and African Petroleum closed 17.49 per cent up.

Zenith Bank grabbed 16.54 per cent on the heels of the expected release of its audited result for the year ended December 31, 2009 to be released in the next few weeks. Expectations are that the bank could still offer a dividend for the period, given that going by its un-audited result for the fourth quarter ended September 30, 2009, earnings income still rose, while the management still reported a profit attributable to shareholders despite its N26 N26.144 billion "full provision" loan loss within the period. Gross earnings income improved by about N32.365 billion or 16.26 per cent to N199 billion, from N166.635 billion in the corresponding period of 2008, out of which profit before tax stood at N47.158 billion, up by a sluggish N2.264 billion or 5.04 per cent from N4.894 billion in the fourth quarter of last year. The provision left PBT after extraordinary item at N21.031 billion, representing a slide of about N23.863 billion or 53.15 per cent, compared to the previous year's figure. Profit attributable to shareholders for the period dropped by N18.628 billion or 53.19 per cent from N35.018 billion last year to N16.39 billion. Reacting to the result, a stockbroker noted then that the result is a good one "with the full provisioning for losses. We would be seeing the bank's results on a clean slate, (just as) the stock will become more attractive," going forward.

Benue Cement Company closed 16.25 per cent better; Guaranty Trust Bank, 16.1.25 per cent; Guaranty Trust Bank, 16.13 per cent, just as it is expected to still declare a profit for the year to December 31, 2009, as it also begins on a clean slate following the N24.966 billion provisions for "loan loss expenses." The bulk of this- N20.789 billion in the account, was made (as earlier reported) within the first half of last year. The nine months' result, showed gross earnings income increase of about N47.971 billion or 72.1 per cent to N114.503 billion, as against the N66.532 billion in the corresponding period of last year. Profit before tax however fell by N5.686 billion or 21.80 per cent from N26.075 billion to N20.389 billion, while profit attributable to shareholders improved a sluggish N0.45 billion or 2.53 per cent from N17.731 billion to N18.181 billion, translating to earnings per share of about 120 kobo, compared with the previous 117 kobo.

Lafarge Cement WAPCO Nigeria grabbed 14.27 per cent; UAC of Nigeria, 14.01 per cent; and Nestle Nigeria, 12.73 per cent, helped by its significant gains in the past few week. First Bank closed 7.97 per cent better; Nigerian Breweries, 7.97 per cent; Nigerian Breweries, 7.51 per cent; and Dangote Sugar Refinery, 5.70 per cent and Flour Mills of Nigeria, 5.68 per cent.

Worst performing stocks for the period was led by automobile and tyre sub-sector player- Incar, which lost 205 kobo or 47.34 per cent over the period; Unity Kapital, 38.24 per cent; Goldlink Insurance, 37.89 per cent; Crusader (Nigeria), 35.03 per cent; Alumaco, 33.53 per cent; and Unic Insurance, 30.91 per cent.

Conclusion

It is was not known as at press time, how long the profit-taking session would last, after the index declined for the second time on Monday, cutting 360.77 points or 1.56 per cent to close at 22,863.51 points at the end of trading.

One thing that seems sure for now is that the market indicators may somehow find a new support level after which they are expected to start trending up. This is to be helped by expectations of the publication of performance score-cards by the various companies with December 31, year end, particularly the banks.