Investors in the Nigerian equities market last week waited in vain for a possible rebound of the market after two weeks of consistent decline following weak confidence on the back of negative news from the House of Representatives Ad Hoc Committee investigating the near collapse of the capital market.

The market had at the beginning of this month sustained a consistent positive run and reached a seven-month high on the back of strong bargain hunting as a result of excellent second quarter results released by banks and companies in the manufacturing sector.

Despite the current situation in the market, experts and market watchers expects further appreciation in the market in the next few weeks as investors continue to position themselves for the release of companies' quarterly results.

Trading had last Monday resumed on a poor note and extended the negative run to the next day. But the market returned northward on Wednesday as investors take advantage of discounted stocks for possible gains. It again returned southward on Thursday and the close of business last Friday as the Wednesday resurgence failed to sway investors.

A review of trading statistics released by the Nigerian Stock Exchange (NSE) revealed that all major market indicators closed in red, led by the twin market gauge the All-Share Index or ASI and the market capitalisation.

The All-share Index, which shows the direction of equities prices opened at 22,622.44 depreciating by -241.33 points or -1.07 per cent to close on Friday at 22,381.11. Also Market Capitalisation of listed equities depreciated from N7.214 trillion to N7.137 trillion.

All the NSE sectoral indices closed downwards as the NSE 30 index, NSE Consumer Goods Index, NSE Banking Index , NSE Insurance Index, and NSE Oil/Gas Index all depreciated -241.33 points (or -1.07 per cent), -15.02 points (or -1.46 per cent), -29.67 points (or -1.61 per cent), -9.52 points (or -2.87 per cent), -1.92 points (or -1.49 per cent) and -1.57 points (or -0.79) respectively.

A further analysis of the NSE trading result showed that investors sold a total of 1.848 billion ordinary shares worth N13.863 billion made in 20,435 deals, in contrast to a total of 2.243 billion shares valued at N19.359 billion exchanged the previous week in 23,053 deals.

At the close of trading activities for the week, the Financial Services sector of the equities market accounted for 1.113 billion shares valued at N8.868 billion traded in 11,489 deals. This was followed by Information Communication Technology with 358.012 million shares valued at N818.097 million traded in 42 deals.

The banking subsector of the Financial Services sector was the most active during the week (measured by turnover volume) with 1.026 billion shares worth N8.814 billion exchanged by investors in 10,910 deals. The volume of shares sold in the sector was driven by activity in the shares of UBA Plc, Guaranty Trust Bank Plc, and First Bank of Nigeria Plc. Trading in the shares of the three banks accounted for 458.197 million shares, representing 56.00 per cent, 60.77 per cent and 33.76 per cent of the turnover recorded by the sector, subsector and total equities turnover for the week, respectively.

Also traded during the week were 700 units of NewGold Exchange Traded Products (ETFs) valued at N1.691 million exchanged in 7 deals. However, there were no transactions in the Federal Government development stocks, state/local government bonds and corporate bonds/debentures stocks sectors.

Gainers and Losers

Twenty three equities appreciated in prices during the week, lower than the 27 of the preceding week. Transnational Corporation of Nigeria Plc led on the gainers' table by 23.73 per cent to close at N0.73 per share followed by Dangote Flour Mills Plc by 15.31 per cent gain to close at N6.93 per share. Other price gainers' in the Top 10 category include: Nigerian Bags Manufacturing Plc (N2.03), Livestock Feeds Plc (N1.10), PRESCO Plc (N15.01), Cadbury Nigeria Plc (N16.00), U A C N Plc (N36.00), GlaxoSmithKline Consumer Nigeria Plc (N20.00), Japaul Oil & Maritime Services Plc (60 kobo), Unilever Nigeria Plc (N30.51).

On the other hand, 35 stocks depreciated in prices higher than the thirty one (31) of the preceding week. Nigerian Aviation Handling Company Plc led on the price losers' table, dropping by -27.70 per cent to close N5.90 per share while Union Bank Nigeria Plc followed with a loss of N0.09 or -18.04 per cent to close at N5.90 per share. Other price losers in the Top 10 category include: First City Monument Bank Plc (N4.52), Neimeth International Pharmaceuticals Plc (62 kobo), Fidson Healthcare Plc (85 kobo), Continental Reinsurance Plc (73 kobo), Okomu Oil Palm Plc (N32.49), RT Briscoe Plc (N1.36), International Breweries Plc (N5.35) and A.G. Leventis Nigeria Plc (N1.07).

Margin Loan

Meanwhile, in a bid to ensure sustained liquidity in the capital market, the Chief Executive Officer of the NSE, Mr. Oscar Onyema, last week said the recently-appointed market makers be exempted from the rule limiting banks' lending to the capital market in form of margin loans to 10 per cent.

Following the negative impact of the huge banks' exposure to the capital market in 2007 and 2008 that partly caused the crisis in the market, the Central Bank of Nigeria (CBN) and SEC, issued new guidelines that limit banks' margin loans to 10 per cent of bank's loan portfolio.

This has affected the availability of funds to market operators. However, Onyema has said the 10 market makers appointed recently should be given an exemption under this rule.

The NSE boss advocated this exemption in a presentation to the House of Representatives Ad Hoc Committee investigating the near collapse of the capital market.

According to him, while the CBN and SEC guidelines are in place to prevent market abuse, there was the need to consider the market makers for an exemption in order for them to perform their duty of maintaining liquidity in the capital market.

"While these prudential guidelines are in place to prevent market abuse, the NSE is advocating exemption for market makers registered by the NSE, as they carry the responsibility of maintaining liquidity in the market. To meet the needs of their customers (and the market), they must be able to buy securities at any time, borrow securities to meet demand at any time, and be liquid at all times to carry out their professional duties. For this purpose, access to margin loan facilities is critical to the program's success. We believe that the recently introduced CBN/SEC margin guidelines will be sufficient to curb the abuses of the past," he argued.

The NSE last April appointed 10 market makers as to enhance the flow of liquidity in the equities market. While the necessary framework is being worked out for the market become operational, the issue of liquidity is seen as a big challenge.

Unveiling the market makers, Onyema had said: "This is a great milestone and a major step in the direction of turning the market round to have liquidity and depth back into the market. We will continue to move forward on this."