24 May 2018

Nigeria: Investors Lose N100 Billion in Three Trading Days

The dominance of the bears remains unabated in the equity sector of the Nigerian Stock Exchange (NSE), following continued price losses by virtually all the blue chip stocks as investors' wealth depreciated by N100 billion in three trading days.

Specifically, the market capitalisation of listed equities, which stood at N14,643 trillion at the reopening of trading on Monday, lost N100 billion or 0.7 per cent to close at N14,543 yesterday.

Also, the All-Share Index, which measures the performance of listed equities, dropped by 274.52 points to 40,150.55 from 40.425.07 at which it opened for trading on Monday.Yesterday, market breadth closed negative, with 15 gainers against 28 losers, a downturn occasioned by losses in medium and large capitalised stocks, among which are UAC of Nigeria, Chemical and Allied Products, Flour Mills Nigeria, Nigerian Breweries and Dangote Flour.

The Chief Research Officer of InvestData Consulting Limited, Ambrose Omodion, said: "We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amid improving company, economic and market fundamentals."It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. A stock market is in cycles. You must know the cycle or particular stocks therein to successfully manage your trading and investment risk."

Analysts at Afrinvest Limited said: "The successive negative performance has created room for attractive entry prices in the market. In this light, we expect bargain hunting opportunities to buoy market performance in the near term."Ikeja Hotel recorded the highest price gain of 9.80 per cent to close at N2.24 per share, followed by MRS Oil Nigeria with a gain of 4.87 per cent to close at N31.20, while First Aluminum appreciated by 4.55 per cent to close at 46 kobo per share.

Niger Insurance appreciated by 4.35 per cent to close at 24 kobo, while John Holt gained 3.85 per cent to close at 54 kobo per share.On the other hand, UAC of Nigeria led the losers' chart by 8.52 per cent to close at N14.50 per share. Chams shed five per cent to close at 38 kobo, while C&I Leasing depreciated by 4.93 per cent to close at N1.35 per share.

Unity Bank declined by 4.90 per cent to close at 97 kobo and UAC Property also shed 4.89 per cent to close at N2.14 per share.The total volume traded depreciated by 5.18 per cent to 266.7 million shares, worth N4.67 billion, and traded in 3,721 deals. Access Bank followed with 30.38 million shares worth N330.49 million, while Fidson Healthcare traded 27.2 million shares valued at N155.1 million. Transcorp traded 21.33 million shares valued at N30.72 million, while Zenith Bank transacted 20.1 million shares worth N560.04 million.

An economist, Johnson Chukwu, said the decline was as a result of shift in the demand for equities for fixed income securities by Foreign Portfolio Investors (PFIs), who have started exiting the market following the unstable macroeconomic environment.He said: "The FPIs had taken their position in 2017 in the equities market, and that was why we saw the 42 per cent appreciation of the market. But in Q1'18, PFIs invested $701.61 million in equity, $335.88 million in bonds, $3.527 billion in money market, while total capital imports stood at $6.303 billion.

"So, the equity market was sluggish in Q1'18 as foreign investors began to repatriate their dividend and also put demand pressure in the foreign exchange market in response to declining yield on government securities."Chukwu, however, urged domestic retail investors to exercise caution in their investment decision on equities as the market is likely to record continuous drop, given the challenging macroeconomic environment in the buildup to the 2019 general election.

According to him: "Nigeria has a strong mid/long term economic prospects, with high yield environment (cumulative 3-year equities performance - 18.77 per cent in 2015, -17.36 per cent in 2016, and 2017 42.3 per cent). There are acquisitions/take-over opportunities, availability of a number of gift edge investments with low risk and relatively good return prospect. This will happen once we get our politics and economic policy right."

The Founder, Independent Shareholders' Association of Nigeria, Sir Sunny Nwosu, said election anxiety has spurred apathy and low investor confidence in the market, as foreign investors that play a dominant role have exited the equity market.More so, he explained that the decision of the Central Bank of Nigeria (CBN) to retain Monetary Policy Rate (MPR) at 14 per cent has also affected investors' demand for equities.

"The outcome of the MPC meeting could not reverse the downward trend, since the CBN MPC voted to maintain the status quo for the 10th consecutive session by retaining the MPR at 14 per cent. "Investors were also skeptical on the direction the interest rate will go, whether up or down. But since they have made their decision known, I will expect that investors will make up their minds on their investment decision.

"Again, anytime we have election, investors want to invest with caution, especially foreign investors who have resorted to dumping their shares and exiting the market. I have always said it that the making of the market depends on the local investors who will stay in the market whether the market is up or down. The foreign investors will invest only when the market is bullish and dump their shares when the chips are down. And that is what is happening in the market currently."

The president of Proactive Shareholders' Association, Taiwo Oderinde, said: "Shareholders, especially minorities, are taking advantage of the upward movement in the price of stocks. Also, there is the need for people to understand that it is characteristic of an active market to give room for instability in the prices of stocks known as a bearish trend that will soon be over. There is no need to fear."

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