The bearish sentiments which have characterised the market in recent times continued again as the market’s All Share Index lost by a phenomenal 262 basis points (2.62%) to close at 57,386 points compared with that of last week at 58,929 points the previous week. Year to Date, the market has now lost by over just over 2% indicating that investors who invested their funds at the beginning of the year have experienced a decline in their portfolios by over 200 basis points.
With the index outperforming several blue chip stocks, most investor have experienced capital losses of even greater magnitude than the index. Total market capitalisation also lost by 3.78% while volume traded dipped by 12.12%. The only ‘positive’ statistic during the week was market turnover which improved by an impressive 48.84%.
Overall the market can be said to have closed on a bearish note both in terms of performance and activity levels.
Analysts have attributed this declining trend to government’s recent position on margin lending by banks to Stockbroking firms. The Federal Government recently announced a stop order on the practice in which banks give facilities to stockbrokers to who in turn lend such monies to their clients based on the acceptance of certain terms and conditions. Other analysts believe that the market is merely going through market correction as some of the quoted stocks are highly overvalued.
Several factors have also been attributed to the faltering performance of stocks such as liquidity squeeze, emergence of other alternative investment vehicles as well as general drop in the confidence level of investors. Whatever the case, consistent drop in prices have negatively affected investor morale with several investors exiting stocks on a daily basis. A rebound in market activities cannot however be seen in the immediate future.
Perhaps the major contributor to the overall decline in the market’s performance was the banking sector with all the big seven banks (First Bank, GTBank, Intercontinental Bank, Oceanic Bank, UBA, Union Bank and Zenith Bank) making up over 35% of overall market capitalisation. All the stocks within this category lost points during the week under review. Despite GTBank’s impressive result in which it recorded a 60% growth in Profit after Tax (PAT), declared a dividend of 70 kobo and bonus of 1 for 11, the banking giant still lost by a total of 11.16% to close at N28.43. The bank is not known for sharp rises in price over short periods so a sustained rally was not expected. The loss it suffered is however coming on the heels of the general lull in the market. UBA, despite its adjustment in price due to ‘mouth watering’ corporate actions, was not able to attractive any interest from investors.
During the review period, the stock’s price declined by 39.47% from N57 to N34.50 (inclusive of its dividend adjustment). Intercontinental Bank which seems to have found a trading range of between the N40-N45 price band lost by 3.47%.
Among the second tier banks, the best performing stock was Fidelity bank as it recorded a 5% rise in its price. The only other gainers in this category were that of FCMB (0.3%) and Platinum Habib Bank (0.48%). Ecobank was the proverbial black sheep among its peers as it declined by a total of 11.93% to close at N8.12 from N9.22. The bank which was recently released from technical suspension due to its failed merger talks with Sterling Bank, made public its intention to approach the market to raise extra funds through a hybrid offer. The stock subsequently rallied for some days before coming under the heat of speculators. Consistent maximum price losses led to its eventual unimpressive performance. Other stocks which experienced price dips include Afribank (4.26%), Diamond Bank (6.61%), First Inland Bank (1.27%) and IBTC Chartered Bank (2.78%). Skye Bank completed the list with a 5.63% crash in its share value. Ecobank Transnational Incorporated had its price adjusted for its 5 for 1 share split. The stock’s share price was therefore adjusted upwards by that margin with its share price moving in the opposite direction. The current adjusted price of the stock thereby attracted investors as its current price of below N50 appears attractive in absolute terms.
The agro-allied industry witnessed Okomu Oil closing flat at N29.95. The stock which once attained the price of N40 during the year has been a slow mover in the last couple of weeks. Despite its relatively low price, the agro-allied concern consistently closed with large unfilled offer positions. Presco however defied expectations as the stock which was billed to be adjusted for its bonus issue on Friday the 30th of June, continued to trade normally after that date. The stock which had experience aggressive rallies in previous weeks closed the week 4.95% lower than its opening price. It is expected that when finally marked down for its bonus issue, its adjusted price will present an attractive point for speculators to book entries.
Despite Guinness’ special dividend of N6.80 as well as the release of interim results by Nigerian Breweries (NB) and Nigerian Bottling Company (NBC), the overall performance of stocks with the Breweries/Beverages sectors was short of impressive.
Investors were obviously not attracted to Guinness’ corporate actions as the stock declined, albeit marginally by 0.84%. 7-UP Plc was however the worst performer in the sector as it fell by 4.24% while marginal price upside were recorded in the share prices of NBC and NB. The ‘not-so-impressive’ performance in this sector can be attributed to the general dull market trend which is believed to have an overall bearing influence on its constituent sectors.
The cement industry was very dull. The sector which is experiencing inherent industry challenges such as inadequate government policies, power shortages, inadequate supply to meet demand, etc seems to be reflecting such problems in the capital market with most of the stocks declining in value. Ashaka Cement which had been trading between N48 and N52 in previous weeks dropped to below the N40 price band. It closed at N37 after losing by 10.84%. WAPCO’s fortunes weren’t much better as the stock tumbled to an 8% price loss.
In a true reflection of the overall market performance, the consumer goods industry was extremely bearish. Sugar conglomerate Dangote Sugar Refinery lost by 6% while its sister company Dangote Flour Mills declined by 10.71%. The losing trend was also felt by PZ industries and Unilever with as they both shed 6.4% and 4.75% respectively. Investors in Nestle Foods will however be thankful as they finished the stock on a flat note at N225. Flour Mills of Nigeria, despite its attractive entry point of below the N90 price band still lost points during the week as investors’ general drop in confidence had its impact on the flour milling giant.
In a slight contrast to the performance of the market, the oil marketing sector offered a glimmer of hope to a highly demoralized investing public. African Petroleum closed flat as it is still on technical suspension while Mobil, Oando and Chevron lost marginally by 2.38%, 0.38% and 2.5% respectively. However, quite impressive was the fact that Conoil was able to chalk up 2.37%, Total 5% and Japaul Oil and Maritime Service – an impressive 21.35%. The fringe oil servicing company finished the week as the market’s best performer. Investors seemed attracted to the interim results of the company released during the week in which they grew their PAT by over 155% from N78 million to N201 million.
The insurance sub sector of the financial services industry was probably the hardest hit in the whole market as virtually all the stocks lost heavily. Major losers include recently listed Universal Insurance (17.47%), Niger Insurance (14.72%), Mutual Benefits Assurance ((17.58%), Custodian & Allied Insurance (12.71%) as well as the pair of Law Union & Rock Insurance and Linkage Assurance which both lost by 14.83%. Worthy of mention is the fact that newly listed Invest & Allied Insurance (IAI) finished among the major losers for the week, shedding 17.94% in the process.
The stock came under speculative attack despite market rumours of its price attaining N3. The stock however closed as the most traded stock with over 1.58 billion shares exchanging hands during the review period. It is expected that profit takers who have had their share certificates verified will continue to take profits (at least) on the stock until its gets to its listing price of N1.30.
The overall performance of the market depicts a situation akin to that of a recession but market watchers believe the trend is only temporary. With companies releasing results in quick succession and declaring attractive corporate actions, the market’s performance has still not been lifted. It is expected that investors might begin to have a rethink as regards certain several stocks which have attained Year-to-Date low points and begin to book speculative entries thereby lifting overall performance.
The timing and duration of such possible market resurgence is however clouded with uncertainties.
Lead Capital
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