Economy
Equity Market Ready for Recovery
By FSDH Research
There are indications that the Nigerian equity market is ready for a recovery in the year 2017 after three consecutive years of decline. The equity market, as measured by The Nigerian Stock Exchange All Share Index (NSEASI), depreciated by 16.14%, 17.36% and 6.17% in 2014, 2015 and 2016 respectively.
As at April 28, 2017 the NSEASI had lost 4.15% of its value. The major factors responsible for the poor performance of the equity market in the last three years are: weak macroeconomic performance, inconsistent policies, weak corporate earnings and portfolio realignment from equities to fixed income securities.
However, looking at the strong growth in the unaudited results that quoted companies released for the period January – March 2017 and the improvement in the macroeconomic environment, we believe the equity market is ready for a recovery in 2017.
As at April 27, 2017, 62 quoted companies had released their unaudited quarterly results for the period January – March 2017.
The total turnover of these companies increased by 41% from N1,450billion in 2016 to N2,042bilion in 2017.
The Profit Before Tax (PBT) increased by 45% from N257billion in 2016 to N373billion in 2017 while the Profit After Tax increased by 29% from N240billion in 2016 to N310billion in2017.
The recent increase in the crude oil price and production and subsequent increase in the external reserves have helped to stabilise the foreign exchange market – a major concern of the foreign investors. The increase in the supply of foreign exchange to meet the input requirements of manufacturing companies should increase their production activities and revenue in the current financial year.
The fiscal and the monetary authorities are implementing policies that should inspire investors’ confidence in the Nigerian economy and market.
Our survey shows that most investors did a lot of portfolio realignment -moving from equities to fixed income securities. The main reason for this was the lacklustre performance of equities in the face of attractive yields on fixed income securities.
The data from the National Pension Commission (PenCom) on the allocation of the Pension Fund Assets as at February 2017 shows that the weight of the pension fund assets on domestic equity dropped consistently from 2014 to 2017.
The weight stood at 13.7%, 10.4%, 8.6% and 7.5% in February 2014, 2015, 2016 and 2017 respectively. These figures are lower than PenCom’s approved pension fund assets allocation weight to equities, an indication that there is room for pension fund assets to allocate more funds to equities.
PenCom stipulates the maximum weights of equities in the investment portfolio of pension assets as follows: Fund I: 30%; Fund II: 25%, Fund III: 10% and Fund IV: 5%. Any pension contributor can make a formal request to join Fund I. Fund II is for active contributors who are below the age of 49 years. Fund III is for active contributors who are 50 years and above while Fund IV is strictly for retirees.
The analysis of the equity transactions on the NSE in the last three years shows investors’ apathy for equity investment.
According to the NSE, the value of equity transactions from foreign and domestic investors declined between 2014 and 2016.
Foreign transactions were N1.54trillion, N1.03trillion and N0.52trillion in 2014, 2015 and 2016 respectively while Domestic transactions were N1.14trillion, N0.88trillion and N0.63trillion in 2014, 2015 and 2016 respectively.
Although the relative size of foreign investors’ participation in the equity market declined between 2014 and 2016 (58%, 54% and 45% in 2014, 2015 and 2016 respectively), the share of foreign investors’ participation was higher than domestic investors’ participation between 2014 (Foreign: 58% and Domestic: 42%) and 2015 (Foreign: 54% and Domestic: 46%).
The foreign investors’ participation in 2016 at 46% was lower than domestic investors’ participation at 54%.
The uncertainties surrounding the foreign exchange policies and the difficulties to access foreign exchange to repatriate capital and profit led to the withdrawal of foreign investors from the market. The stability in the macroeconomic environment and the strong earnings of quoted companies should attract the needed liquidity into the market. Consequently, the equity market should record a strong recovery in the year 2017.
Source: FSDH Research
By Adedapo Adesanya
Okitipupa Plc was the sole price gainer at the NASD Over-the-Counter (OTC) Securities Exchange on Friday, August 7, lifting the trading platform by 0.44 per cent at the close of transactions.
The share price of the palm oil producer appreciated during the trading session by N25.00 or 9.0 per cent to N277.00 per unit compared with the previous day’s N252.00 per unit.
As a result, the market capitalisation gained N12.29 billion to close at N2,807 trillion, in contrast to the previous session’s N2.795 trillion, while the NASD Security Index (NSI) added 93.63 points to finish at 4,678.08 points compared with Thursday’s 4,657.59 points.
The bourse recorded a price loser yesterday, and this was Mass Telecoms Innovation Plc, which crashed by 3 Kobo or 9.4 per cent to settle at 32 Kobo per share versus the previous day’s 35 Kobo per share.
The volume of securities traded by investors plunged by 81.5 per cent to 535,7560 units from 2.9 million units, the value of securities slumped by 93.9 per cent to N6.0 million from N99.2 million, and the number of deals decreased by 41.9 per cent to 36 deals from 62 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units transacted for N6.5 billion, and Central Securities Clearing System (CSCS) Plc with 77.0 million units exchanged for N5.5 billion.
GNI Plc also ended the day as the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, trailed by Infracredit Plc with 2.3 billion units valued at N6.5 billion, and Resourcery Plc with 1.1 billion units sold for N415.7 million.
By Dipo Olowookere
A 0.15 per cent growth was achieved by the Nigerian Exchange (NGX) Limited, driven by continued buying interest in banking stocks such as First Holdco and others.
The banking index was up by 1.53 per cent during the session, offsetting the losses recorded by the others. The industrial goods segment fell by 0.37 per cent, the insurance counter shrank by 0.21 per cent, and the energy sector contracted by 0.04 per cent, while the consumer goods space closed flat.
At the close of business, the All-Share Index (ASI) moved up by 364.26 points to 245,573.60 points from 245,209.34 points, and the market capitalisation increased by N235 billion to N158.513 trillion from N158.278 trillion.
Despite the gains printed by Customs Street during the trading day, investor sentiment was weak, as there were 22 price gainers and 24 price losers, indicating a negative market breadth index.
UPDC surged by 9.23 per cent to N3.55, CWG soared by 6.56 per cent to N19.50, AXA Mansard appreciated by 4.80 per cent to N13.10, Neimeth advanced by 4.24 per cent to N8.60, and Cutix improved by 4.00 per cent to N2.60.
Conversely, Red Star Express lost 10.00 per cent to trade at N18.00, CAP declined by 9.98 per cent to N115.45, John Holt shrank by 9.82 per cent to N10.10, ABC Transport depreciated by 9.57 per cent to N5.20, and Legend Internet crashed by 8.70 per cent to N4.20.
A total of 1.5 billion equities worth N26.7 billion exchanged hands in 42,580 deals on Friday versus the 531.8 million equities valued at N20.5 billion traded in 44,826 deals on Thursday, representing a spike in the trading volume, value, and number of deals by 182.06 per cent, 30.24 per cent, and 5.01 per cent, respectively.
The busiest stock during the session was Fortis Global Insurance, with a turnover of 824.5 million units valued at N2.1 billion, FCMB traded 217.9 million units worth N2.8 billion, Access Holdings exchanged 176.2 million units for N4.7 billion, Chams sold 32.5 million units worth N132.1 million, and First Holdco transacted 25.0 million units valued at N3.7 billion.
By Adedapo Adesanya
The Naira further closed south against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, August 7, by 81 Kobo or 0.06 per cent to N1,365.69/$1 from N1,364.88/$1.
It was a similar situation for the Nigerian Naira in the official market during the session as against the Pound Sterling; it lost N1.08 to quote at N1,839.17 versus the previous day’s N1,838.09/£1, and against the Euro, it slipped by N1.23 to close at N1,575.73/€1, in contrast to the preceding session’s N1,574.80/€1.
Further, at the GTBank forex counter, the Nigerian currency weakened against the Dollar yesterday by N2 to settle at N1,371/$1 compared with Thursday’s N1,369/$1, and at the black market, it traded flat at N1,400/$1.
The country’s legal tender came under FX demand pressure on Friday, with turnover rising by 304.3 per cent to $399.5 million from $98.8 million the previous day, with the number of deals slightly up to 107 from 106.
Next week, traders expect the Naira to hold steady, buoyed by dollar sales by the Central Bank of Nigeria (CBN), whose presence in the market could help ease demand pressure.
As for the cryptocurrency market, Bitcoin (BTC) neared the $65,000-mark after it gained 0.8 per cent to trade at $64,968.05, as investors took advantage of recent drops to shore up their holdings.
Previously, the decision by the US Senate to delay a vote on the Crypto Clarity Act until at least September weakened the outlook. The bill, which would set out which US regulator oversees which digital assets, needs 60 votes to pass and it is unclear whether it currently has 50.
Solana (SOL) grew by 2.5 per cent to $74.81, Dogecoin (DOGE) rose by 1.3 per cent to $0.0702, Binance Coin (BNB) jumped by 1.1 per cent to $593.80, Ethereum (ETH) expanded by 0.5 per cent to $1,916.08, Ripple (XRP) also soared by 0.5 per cent to $1.03, and TRON (TRX) appreciated by 0.2 per cent to $0.3275.
However, Cardano (ADA) depreciated by 1.0 per cent to $0.1997, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
