Leadership (Abuja)

14 January 2013

Nigeria: Stock Market Showing Signs of Relative Stability

Recent development at the Nigerian Stock Exchange suggests that investors are currently responding to experts' advice that in the event of a meltdown in the prices of shares, investors need to invest in the market despite recurrent losses in recent times so as to gain in the long run.

The stock experts base their counsel on the tripod of listed equities having inherent value; present prices of most stock selling below their real worth and the determination of the present managers in the market to return the Exchange to profitability through verifiable reforms.

The meltdown in the prices of securities in the stock market beginning from March 5, 2008 had resulted in most companies' stocks in the market becoming penny stocks even as confidence is climbing gradually.

The experts are of the idea that the low price of stocks should make any discerning investors to take position in anticipation of capital appreciation, as well as huge return on investment in 2013.

Recently, analysts at First Securities Discount House (FDSH) noted that "the current improved regulatory oversight on the equities market will boost investors' confidence both locally and internationally."

They are of the view that the only way the market must go after losses that saw most stocks becoming of penny value is to go northward.

In the same vein, the Chief Executive Officer Financial Derivatives Mr. Bismarck Rewane, foresaw an improvement in investor confidence in the market going forward, though he noted the possibility of profit-taking activity by speculators in the market.

He said the market has since bottomed out and that the only alternative left, every other thing being equal, is for the stock market to begin to enjoy some relative stability especially as issues in the financial sector relating to the rescued banks have been sorted out.

The stock market in the second week of the year continued upbeat in spite of the two-day loss occasioned by profit taking within the week, hence showing signs of relative stability.

At the last count of trading at the weekend, the NSE All-Share Index appreciated by 2.33 per cent to close at 29,202.01. Also, Market Capitalisation of the listed equities appreciated by 2.39 per cent to close at N9.340trillion.

All the sectorial indices appreciated: the Bloomberg NSE 30, Bloomberg NSE Consumer Goods, Bloomberg NSE Banking, Bloomberg NSE Insurance,Bloomberg NSE Oil/Gas index and NSE Lotus II appreciated by 2.40 per cent (+4.16 per cent YTD), 1.95 per cent (+2.78 per cent YTD), 4.09 per cent (+10.34 per cent YTD), 2.73 per cent (+6.52 per cent YTD), 6.13 per cent (+6.78 per cent YTD) and 1.92 per cent (+0.98 per cent YTD) respectively.

A review of the equity price movements indicated that fifty-two (52) equities gained while twenty (20) equities recorded price declines and prices of one hundred and twenty-three (123) equities remained constant. When compared with the preceding week, fifty-one (51) equities gained while twelve (12) equities recorded price declines and prices of one hundred and thirty-two (132) equities remained constant.

Further review of the trading activities revealed that a turnover of 2.160 million shares worth N16.998 billion in 31,241 deals were traded during the week in contrast to a total of 972.737million shares valued at N8.509 billion that exchanged hands preceding week in 13,745 deals.

The Financial Services sector was the most active during the week (measured by turnover volume) with 1.686 billion shares worth N12.055billion exchanging hands in 19,947 deals.

Volume in the sector was largely driven by activity in the shares of UBA Plc, Fidelity Bank Plc, Unity Bank Plc, and Zenith Bank Plc. Trading in the shares of the four Banks accounted for 807.493 million shares, representing 48.00 per cent and 37.39 per cent of the sector and total turnover traded during the week respectively.

The Conglomerates sector boosted by activity in the shares of Transnational Corporation of Nigeria Plc followed on the week's activity chart with a turnover of 195.656 million shares valued a at N302.207million in 960 deals.

The Consumer Goods sector (measured by turnover volume) was third with 93.297 million shares valued at N3.121 billion traded in 4,892 deals. The top three sectors accounted for 1.975 billion shares valued at N15.478billion traded in 25,799 deals, thus accounting for 91.00 per cent , 91.06 per cent and 83.00 per cent , of the volume, value and number of deals respectively.

Also traded during the week was 413 units of NewGold Exchange Traded Funds (ETFs) valued at N1.042million exchanged hands in five deals in contrast to a total of 438 units valued at N1.108 million transacted last week in four deals. There were no transactions through the stock market in the FGN Bonds, State/Local Government Bonds and Corporate Bonds/Debentures sectors.

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