Economy
Is Equity Market Rally Sustainable?
The performance of the Nigerian equity market as measured by The Nigerian Stock Exchange All Share Index (NSE ASI) has been impressive since the beginning of the year 2017.
As at the close of trading on July 27, 2017, the NSE ASI had appreciated by 38.59 percent Year-to-Date (YTD).
A review of the performance of 15 major equity market indices in other countries shows that the NSE ASI recorded the best performance of 37 percent as at July 26, 2017, closely followed by GSE All Share Index (Ghana) at 34 percent.
The International Monetary Fund (IMF) in its World Economic Outlook (WEO) Update July 2017 edition, states that equity prices in advanced economies remain strong, and are showing continued market confidence about company earnings.
It notes that markets are also optimistic about emerging market prospects as reflected in strengthening equity markets and some further compression of interest rate spreads.
It however cautions that oil exporters provide an exception to this pattern, because of the dwindling oil prices since March 2017.
The big question in the minds of investors and equity market analysts is if the strong growth in the equity market since April 2017 is sustainable or if there is a bubble waiting to burst.
Our review of the Price to Earnings (P/E) multiples of the top 10 most capitalised stocks on The Nigerian Stock Exchange (NSE) as at July 27, 2017 shows that the companies traded at higher P/E multiples in July 2017 than in July 2016 and in July 2015.
The average P/E multiple for the companies increased from 11.46x in July 2015 to 12.25x in July 2016 and to 27.06x July 27, 2017.
Nestle recorded the highest P/E multiple of 78.87x in July 2017 and 34.91x in July 2015 while Nigerian Breweries recorded the highest P/E multiple in 2016 at 30.7x.
Although a high P/E multiple may indicate that investors believe in the future earnings growth of the company, the current trend in the market shows that stocks are trading far higher than the historical level and a possible correction may be imminent.
The monthly analysis of the NSE ASI shows that the equity market rally started in April 2017. The equity market appreciated between April and July 27, 2017 by 45 percent while it depreciated by 4.15 percent between December 2016 and April 2017.
The equity market followed similar trend between April and June in 2016 and 2017. The equity market recorded negative performance both in January and February 2017 at 3.12 percent and 2.72 percent respectively, with investors’ outlook that 2017 might be another bad year for equity market investment.
However, the fortune of the market changed in March 2017 with a month on month appreciation of 0.74 percent, April 0.95 percent, May 15 percent, June 12 percent, and 12 percent as at July 27, 2017.
YTD, the top gainers in the equity market as at July 27, 2017 are: May & Baker 245.74 percent; Fidson Healthcare 172.66 percent; Stanbic IBTC Holdings 150.00 percent; UBA 124.44 percent; Beta Glass 99.01 percent; Cement Company of Northern Nigeria 94 percent; Airline Services 91.20 percent; Okomu Oil 85.24 percent; FBN Holdings 78.21 percent; and Presco 77.06 percent.
Some notable factors that are responsible for the market rally are: improved business and consumers’ confidence in the economy, consistent improvement in the Purchasing Managers’ Index (PMI), stability in the foreign exchange market leading to the inflow of foreign investors, particularly with the establishment of the Investors and Exporters’ Foreign Exchange Window and the prospect of improvement in corporate earnings.
While we note that the improvement in the macroeconomic environment in the last few months has sustained the rally in the equity market, we think profit taking is imminent on a few stocks that have recorded strong appreciation in their share prices.
By Bon Peter
The Area 11 Command of the Nigeria Customs Service (NCS) in Onne, Rivers State surpassed its 2024 annual revenue target by N16 billion.
This information was revealed to newsmen by the Customs Area Controller of the Command, Mr Mohammed Babandede, at a news conference last week.
He also disclosed that the command recently intercepted 12 containers of illicit drugs worth over N20.30 billion concealed in various items.
According to him, the content of the seized container included 1,721,100 bottles of 100ml cough syrup codeine, 510,000 tablets of 50mg Really Extra Diclofenac, 7,100,000 tablets of 225mg Royal apple Tramadol and Tramaking, 3,461 pieces of sanitary ware fittings used for concealment, 840 pieces of Chilly cutter used for concealment, and 153 cartons of TVS rubber.
“Our vigilant officers and men have successfully intercepted and seized an additional 12 containers (40 feet) of illicit medicine.
“This is a testament to our unwavering commitment to safeguarding public health, ensuring security of our nation and compliance with Nigeria’s import regulations. This also justifies our commitment to trade facilitation, transparency, effective and efficient service,” he said.
He said last year, the command received the support of different stakeholders, thanking them for working with the agency to achieve success.
“We appreciate the continued support and collaboration of all stakeholders, including the media, in amplifying our message and efforts to combat smuggling,” he said.
Mr Babandede stated that, “It is worth noting that the morale and dedication of our officers have been significantly bolstered by the Comptroller-General of Customs’ award, recognizing Area 2 Command as the Best Command in Anti-Smuggling Operations.
“This honour has further strengthened our resolve, and I assure you that we will not relent in performing our duties to protect the lives and well-being of Nigerians.”
The customs chief said earlier last year, the command was given a revenue target of N618 billion but as of December 31, 2024, it generated N634 billion, higher than the N321 billion recorded in 2023, promising to do more in 2025.
By Dipo Olowookere
The Nigerian Exchange (NGX) Limited appreciated by 0.39 per cent on Friday as the demand for local equities continued to increase.
During the final trading session of the week, the insurance maintained its upward trend with a growth of 7.81 per cent as the banking index appreciated by 1.08 per cent, the consumer goods sector rose by 0.52 per cent, and the industrial goods counter expanded by 0.33 per cent, while the energy space went down by 0.49 per cent.
At the close of business, the All-Share Index (ASI) jumped by 406.19 points to 103,586.33 points from 103,180.14 points, and the market capitalisation increased by N248 billion to N63.166 trillion from N62.918 trillion.
The bourse recorded 67 appreciating shares and 11 depreciating shares, implying a positive market breadth index and strong investor sentiment.
Chams, Omatek, NCR Nigeria, Learn Africa, and Regency Alliance topped the gainers’ table after they gained 10.00 per cent each to finish at N2.31, 88 Kobo, N6.05, N4.95, and 88 Kobo, respectively.
On the flip side, TotalEnergies lost 9.74 per cent to trade at N630.00, CWG depreciated by 6.04 per cent to close at N7.00, Thomas Wyatt went down by 5.26 per cent to N1.80, ABC Transport crumbled by 4.07 per cent to N1.18, and UAC Nigeria shed 3.19 per cent to N31.90.
Yesterday, investors traded 709.3 million stocks valued at N8.2 billion in 13,593 deals compared with the 829.8 million stocks worth N5.7 billion transacted in 11,752 deals on Thursday, representing a slowdown in the trading volume by 14.52 per cent and a rise in the trading value and number of deals by 43.86 per cent and 15.67 per cent, respectively.
At the close of business, Chams topped the activity log with 58.1 million equities sold for N133.8 million, Veritas Kapital traded 55.1 million shares valued at N89.2 million, Abbey Mortgage Bank exchanged 50.1 million stocks for N165.5 million, AIICO Insurance transacted 39.7 million equities worth N68.3 million, and NPF Microfinance Bank sold 34.3 million stocks valued at N64.0 million.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange extended its positive start to the year with a 0.08 per cent rise on Friday, January 3.
The market saw a gain of N840 million, with the value of the alternative bourse growing to N1.046 trillion from the N1.045 trillion it closed a day earlier as the NASD Unlisted Security Index (NSI) made an addition of 2.43 points to wrap the session at 3,052.34 points compared with 3,049.91 points recorded at the previous session.
The appreciation posted yesterday at the NASD OTC exchange was caused by two price gainers led by Industrial and General Insurance (IGI) Plc which jumped by 2 Kobo to end at 20 Kobo per share compared with the preceding session’s 18 Kobo per share and UBN Property Plc, which improved its value by 16 Kobo to close at N1.98 per unit, in contrast to Thursday’s closing price f N1.82 per unit.
The market posted a price loser, which was FrieslandCampina Wamco Nigeria Plc as it dropped 18 Kobo to finish at N39.76 share versus the previous day’s N39.94 per share.
There was an 856.6 per cent surge in the volume of securities traded in the session to 11.3 million units from the 1.2 million units traded in the preceding session.
Equally, there was a jump in the value of shares traded yesterday by 1,078.4 per cent to N56.8 million from the N4.8 million made previously, and the number of deals increased by 22.7 per cent to 27 deals from 22 deals.
FrieslandCampina Wamco Nigeria Plc was the most active stock by value (year-to-date) with 1.4 units worth N55.8 million, IGI Plc came next with 10.6 million units valued at N2.1 million, and 11 Plc was in third with 6,45 units sold for N1.4 million.
IGI Plc closed the day as the most active stock by volume (year-to-date) with 10.6 million units sold for N2.1 million, FrieslandCampina Wamco Nigeria Plc came next with 1.4 million units valued at N55.8 million, and UBN Property Plc followed with 275,740 units worth N545,965.
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