27 January 2014

Nigeria: CRR Hike Causes Stock Market Jitters

Activities at the Nigerian equities market were highly volatile last week as investors reacted to the hike of the Cash Reserve Requirement on public sector funds to 75 per cent.

The Central Bank of Nigeria (CBN) had last Tuesday at its first Monetary Policy Committee (MPC) meeting this year raised banks' CRR on public sector deposits from 50 per cent to 75 per cent. It, however, left the CRR on private deposits unchanged at 12 per cent. Despite the high volatility, the benchmark index crept up by 0.40 per cent week-on-week (WoW) just as year-to-Date (YTD) return stood at 1.42 per cent and 1.17 per cent YTD gain in Dollar terms.

Also, activity level in terms of both volume and value exchanged increased last week. Total volume of trades rose 15.21 per cent to 1.74 billion units as did turnover which grew 14.63 per cent to N21.01 billion. The ICT sector led the sectorial performance with an impressive 8.21 per cent YTD gain from 1.48 per cent it delivered previous week.

The local bourse emerged stronger the previous week when it shrugged off bearish sentiment to deliver a 0.65 per cent return within the week. The performance was aided by investors' sentiment, which favoured the Tier 1 banks such as Zenith Bank Plc, FBN Holdings Plc and Access Bank Plc.

Trading had last Monday resumed on a poor note as activities on the exchange decreased by 11.28 per cent with respect to volume, as investors bought 308.71 million shares worth N4.52 billion in 5,530 deals compared to 347.95 million shares worth N3.91 billion in 5,825 deals exchanged the previous Friday. NEM Plc, UbaCap Plc. and TRANSCORP Plc; were the most actively traded stocks on the exchange on the day.

Trading activities again decreased on Tuesday by 20.55 per cent with respect to volume, as investors bought 276.43 million shares worth N3.05 billion in 5,698 deals compared to 347.95 million shares worth N4.52 billion in 5,530 deals exchanged on Monday. TRANSCORP Plc, Fidelity Bank Plc, and FBN Holdings Plc were the most actively traded stocks on the exchange last Tuesday value. Bolstered by Dangote Cement Plc, the benchmark index soared 1.11 per cent to set a new year-to-date (YTD) high of 41,932 points at the close of trade. The Industrial giant pumped over 270 points to the index assisted by Guaranty Trust Bank Plc, Nestle Nigeria Plc, FBN Holdings Plc and Zenith Bank Plc with an additional 160 points. Also, market capitalisation grew by N14.75 billion to N13.44 trillion on the day. Activity wise, volume traded trimmed by 10.50 per cent to 276.42 million units and in similar trend turnover was down by 32.50 per cet to N3.057 billion. The bears sustained their hold on Thursday as trading on the bourse closed in the positive territory. Consequently, the Exchange's benchmark index climbed 1.18 per cent to 41,958 points in an eventful week. Thursday's gain was driven by uptick in the share prices of blue chips such as Nestle Nigeria Plc, Dangote Cement Plc and the Tier-1 banks. In a twist of events, the same banking stocks that suffered sell pressures last session owing to initial reaction to the increase of Cash Reserve Ratio (CRR) on public sector deposit from 50 per cent to 75 per cent provided the major support to the index on the day.

At the close of business last Friday, the benchmark index rounded up the rather volatile week with a 0.10 per cent decline settling at 41,918 points. Dangote Cement Plc was unable to buoy the index as Zenith Bank Plc, Nestle Nigeria Plc and FBN Holdings Plc shook off over 156 points. However, the market capitalisation gained N67.45 billion over the week to close at N13.43 trillion. The overall market reacted to the 75 per cent CRR increase mirror largely by the banking sector performance.

Indicators Meanwhile, most indicators closed northward, fuelling speculations that the week ahead will be positive. Analysis of trading numbers showed that the Nigerian Stock Exchange (NSE) All-Share Index or ASI and market capitalisation appreciated by 0.40 per cent and 0.50 per cent to close last Friday at 41,917.55 and N13.432 trillion respectively.

Likewise, the NSE 30, NSE Consumer Goods, NSE Oil/Gas, NSE Lotus II and NSE Industrial indices increased by 0.24 per cent,0.09 per cent, 2.90 per cent, 1.93 per cent and 2.61 per cent respectively. However the NSE Banking and NSE Insurance indices decreased during the week by 1.00 per cent and 1.07 per cent respectively while NSE-ASeM closed flat.

Market Turnover A further analysis of trading activity for the week showed that a turnover of 1.758 billion shares worth N21.024 billion in 28,949 deals were traded last week by investors on the floor of the Exchange in contrast to a total of 1.514 billion shares valued at N18.333 billion that exchanged hands the previous week in 25,016 deals.

The Financial Services Industry (measured by volume) led the activity chart with 1.174 billion shares valued at N10.593 billion traded in 15,519 deals; thus contributing 66.81 per cent and 50.39 per cent to the total equity turnover volume and value respectively.

The Conglomerates Industry followed with a turnover of 154.106 million shares worth N776.861 million in 1,696 deals. The third place was occupied by the Oil and Gas Industry with 111.771 million shares worth N2.122 billion in 3,573 deals. Trading in the top three equities namely, Transnational Corporation of Nigeria Plc, FBN Holdings Plc and Zenith International Bank Plc (measured by volume) accounted for 402.481 million shares worth N5.549 billion in 5,934 deals, contributing 22.90 per cent and 26.39 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 425 units of NewGold Exchange Traded Funds (ETFs) valued at N816,000.00 executed in 3 deals compared with a total of 85 units of NewGold valued at N162,775.00 transacted last week in 1 deal. > Similarly, 1,900 units of FGN bonds valued at N1.738 million were this week traded in 9 deals compared with a total of 2,000 units of FGN bonds valued at N2.127 million transacted last week in 20 deals. Gainers and Losers Meanwhile, the price movement chart of the NSE displayed a total of 44 equities that appreciated in prices during the week, higher than 34 equities of the preceding week. Forty three equities depreciated in prices, lower than 47 equities of the preceding week, while 111 equities remained unchanged, higher than 117 equities in the previous week.

The top 10 gainers were Forte Oil Plc (N9.81), Trans Nationwide Express Plc (63 kobo), Costain (WA) Plc (50 kobo), IHS Plc (95 kobo), Courteville Investments Plc (15 kobo), C & I Leasing Plc (9 kobo), John Holt Plc (17 kobo), May & Baker Nigeria Plc (27 kobo), Portland Paints and Products Nigeria Plc (57 kobo), and Prestige Assurance Plc (7 kobo).

On the other hand, the top 10 losers include Learn Africa Plc (29 Kobo), Japaul Oil and Maritime services and IPWA Plc (6 kobo each), Wema Bank Plc (9 kobo), Vono Products Plc (13 kobo), Skye Bank Plc (33 kobo), Diamond Bank Plc (52 kobo), African Prudential Registrars Plc (17 lobo), ETI Plc (90 kobo) and Jos International Breweries Plc (23 kobo).

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