6 August 2012

Nigeria: Stock Market Closes Firmer With Impressive Results

Many equities in the Nigerian stock market inched higher last week on the back of strong corporate results released by blue chip companies during the week. The market the previous week managed a growth of 0.86 per cent despite impressive results declared by banks and manufacturing firms for the second quarter ended June 30 2012. But the Nigerian Stock Exchange (NSE) All-Share Index closed 0.99 per cent higher at 23,523.16.

Trading, last Monday, started on a strong note but moderated the next day as some investors maintained a cautious approach while some took profits. Then it recovered on Wednesday and continued to trend up with a gain of 1.16 per cent on Thursday and 0.68 per cent at the end of the trading session last Friday to close at 23,523.16. Consequently, year-to-date returns of the market stood at 13.30 per cent.

A further analysis of trading last week showed that equities opened the month of August on a positive note with a growth of 2.0 per cent. The market had attained a growth of 6.8 per cent at the end of July - the highest monthly appreciation posted so far this year, compared with 2.6 per cent in June.

The gains recorded during the week under review helped major market indicators to close stronger, led by the twin market gauge. Other than the ASI, which rose by 0.99 per cent, three of the four sectoral indices also appreciated. While the NSE-30 index rose by 1.38 per cent to close at 1,098.24, the NSE Consumer Goods Index rose by 2.65 per cent to close at 1,979.86 and the NSE Banking Index rose by 1.68 per cent to close at 354.51. However, the NSE Insurance Index depreciated by 3.05 per cent to close at 124.20 and the NSE Oil/Gas Index also closed at 173.16 depreciating by 2.32 per cent

Meanwhile, investors sold a total 1.471 billion shares worth N12.350 billion in 19,228 deals last week, compared to 1.639 billion shares valued at N11.869 billion that exchanged hands in 20,989 deals the week before. However, there were no transactions in the Federal Government Development Stocks, State Government Bonds and Industrial Loans/Preference Stocks sectors.

Also traded during the week were 3,050 units of NewGold Exchange Traded Funds (ETFs) valued at N7.636 million, which exchanged in nine deals in contrast to a total of 8,000 units valued at N20.084 million that exchanged hands the previous week in 13 deals.

A further assessment of equities trading showed that the Financial Services sector remained the most active last week in volume, accounting for 1.066 billion shares worth N8.640 billion that exchanged hands in 11,332 deals. Volume in the sub-sector was largely driven by Zenith Bank Plc, Fidelity Bank Plc, and Guaranty Trust Bank Plc. Trading in the shares of the three banks accounted for 512.175 million shares, representing 51.06 per cent, 48.06 per cent and 34.81 per cent of the turnover recorded by the subsector, sector and total turnover of the market respectively last week.

The healthcare sector, boosted by activity in the shares of Neimeth International Pharmaceuticals Plc and Union Diagnostic and Clinical Services Plc followed on the week's activity chart with a turnover of 186.818 million shares valued at N121.137 million in 58 deals.

Price Gainers and Losers

A look at the price movement chart showed that 32 stocks appreciated in value last week compared with 22 the previous week. Nigerian Breweries Plc led the price gainers with N5.30, followed by GlaxoSmithKline Consumer Nigeria Plc.

Other top price gainers included Unilever Nigeria Plc (N2.38), Guinness Nigeria Plc (N2.20); Lafarge Cement WAPCO Nigeria Plc (N1.22); Guaranty Trust Bank Plc (N0.58); First Bank of Nigeria Plc (N0.55); Zenith Bank Plc and Ashaka Cement Plc (N0.45) and Portland Paints Plc (N0.44).

Conversely, 37 stocks depreciated in value just like the previous week. Mobil Oil Nigeria Plc led the price losers at N6.25, trailed by Arbico Plc with a loss of N1.85. Okomu Oil Palm Plc shed NN1.79, while Dangote Cement Plc, Julius Berger Nigeria Plc and Forte Oil Plc declined by N1.50, N1.38 and N1.29 in that order. Other top price losers included: Berger Paints Nigeria Plc (N0.79); Chellaram Plc (N0.62) and Beta Glass Nigeria Plc (N0.52).

NSE Unveils Islamic Index

One of the major events at the stock market last week was the launch of the Shari'ah compliant index known as the NSE Lotus Islamic Index (NSE LII). The index consists of companies that conform with the principles of Shari'ah. It is the first index created to track the performance of Shari'ah compliant equities on the floor of the Nigerian bourse and it is expected to increase the breadth of the market and create an important benchmark for investment as the alternative non-interest investment space widens.

Speaking on the development, The NSE's Project Manager for the NSE LII launch, Mr. Osahon Aire, explained that investment instruments like Exchange Traded Funds (ETFs) could be built on the index which investors with a preference for ethical/Shari'ah compliant investments can invest in. He added that the launch would tactically aid the development of the market.

"The NSE Lotus Islamic Index would further illuminate the massive investment opportunities available to ethically minded investors, both in Nigeria and overseas. All the companies that would appear on the index have been thoroughly screened by Lotus Capital Halal Investment, in accordance with a methodology approved by an internationally recognised Shari'ah Advisory Board, comprising renowned Islamic scholars," Aire noted.

Speaking on the product, the Chef Executive Officer of the NSE, Mr. Oscar Onyema, explained that investment instruments like Exchange Traded Funds could be built on the index, where investors with a preference for ethical/Shari'ah compliant investments could invest in.

The the financial services sector and tobacco companies were excluded from the new index. Others companies that did not make the list are gambling, alcoholic beverages and adult entertainment companies.

The Managing Director of Lotus Capital, Mrs. Hajarat Adeola, said the index was created to track the performance of Shari'ah compliant equities trading on the floor of the exchange. She pointed out that the index comprises 15 stocks which have met the eligibility requirements of the Shari'ah Advisory Board, adding that the stocks are rigorously screened and reviewed bi-annually to ensure their continuous compliance for inclusion.

The companies are: Ashaka Cement Plc, Dangote Cement Plc, Larfage WAPCO Plc, Nahco Plc, Unilever Plc, Nestle Nigeria Plc, Cadbury Nigeria Plc and Cement Company of Northern Nigeria Plc, among others.

According to Adeola, each stock in the index underwent a two-stage screening process and those companies that passed the initial test were evaluated on the basis of Islamic financial screens to eliminate those with unacceptable levels of debt, cash and interest income. "Only companies that passed the second stage are considered for further analysis. Other important criteria such as liquidity and market capitalisation of the equities also taken into account," she added.

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