Category: Equities

Emerging-market stocks fell the most in a month as Brazil’s Ibovespa led a decline among the biggest equity benchmarks in developing nations after a drop in raw-material prices sapped commodity exporters.

Bloomberg reported that the MSCI Emerging Markets Index lost 1.1 per cent to 1,027.38, reducing its fourth monthly gain. A gauge of technology stocks slipped for a second day from a record, led by Taiwan Semiconductor Manufacturing Co. (2330), which declined 2.1 per cent. The Standard & Poor’s GSCI index of raw materials dropped 0.7 per cent as a report showing U.S. consumer spending fell in April stoked concern that slowing growth will reduce demand for commodities in the world’s largest economy.

The Ibovespa sank 1.9 per cent. Commodity producers account for about a third of the benchmark’s weighting. Brazil’s gross domestic product increased 1.9 per cent in the first quarter, trailing the median estimate of two per cent among economists surveyed by Bloomberg. Russia’s Micex Index pared its biggest monthly gain in five years.

“We’re continuing to be in an environment where emerging-market growth is slowing,” Timothy Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, which helps manage about $1.5 billion in assets, said by phone. “You need a pick-up in growth in China or an acceleration in growth in the developed world, which will create export demand. And you don’t see a pick-up in growth in the developed world at this point.”

The emerging-market stock benchmark gained 3.2 per cent in May as easing political tension with Ukraine attracted investors to Russian stocks and the election of a new leader in India fueled a record rally in the S&P BSE Sensex Index.

All 10 industry groups in the developing-market index fell today, led by energy and raw-material producers. A gauge of technology companies fell 0.9 percent as Taiwan Semiconductor declined 2.1 per cent.

The Micex dropped 1.1 per cent on Friday, reducing its gain in May to 9.7 per cent. The Sensex slipped 0.1 per cent, paring its monthly advance to 8.0 per cent.

South Africa’s rand weakened 1.6 per cent after the country’s trade gap unexpectedly expanded in April. The shortfall swelled to 13 billion rand ($1.2 billion) from 11.9 billion rand in March. That compared with a median estimate of 11.3 billion rand in a Bloomberg survey of 15 economists.

The lira slid 0.5 per cent as Turkey’s trade deficit expanded to $7.21 billion in April, compared with a $6.55 billion median estimate of 12 economists surveyed by Bloomberg.

The Thai baht depreciated 1.4 percent this month, the worst performance in Asia, as global investors pulled about $2 billion from the nation’s stocks and bonds.

Army Chief Prayuth Chan-Ocha seized power on May 22 after seven months of protests that began in October and led to clashes that claimed 28 lives. The military government said returning the country to civilian rule soon is “impossible” because the threat of further violence means it can’t guarantee an election would be free and fair.

Stocks traded before changes to MSCI Inc.’s index compositions effective June 2. Wumart Stores Inc. tumbled 6.7 per cent in Hong Kong before being removed from the MSCI China Index. OAO Alrosa, Russia’s biggest diamond producer, jumped as high as 2.9 per cent before trading little changed as the shares are being added to the MSCI Russia Index.

The Shanghai Composite fell 0.1 per cent. The Hang Seng China Enterprises Index gained 0.6 per cent in Hong Kong. Markets in China, Hong Kong and Taiwan will be closed today for public holidays.

The emerging-markets stock gauge has climbed 2.5 per cent this year and trades at 10.6 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has increased 3.2 per cent and is valued at a multiple of 14.4.

The Federal Government needs to pay more attention to the capital market and use its fiscal and monetary policies to accelerate and deepen the growth of the capital market as part of deliberate efforts to strengthen the nation’s economic development.

Chairman, NASD Plc, Mr. Tola Mobolurin, who delivered the 10th PEARL Awards for Capital Market Development in Lagos, said government has a major role to play in the development of the Nigerian capital market and the integration of the entire financial system. He spoke on the theme: Actualising Nigerian Capital Market Quest for Leadership in Africa: Issues, Challenges and Options.

According to him, government should tie the grant of policy instruments such as waivers, licences and special privileges; including pioneer status, to the beneficiaries being quoted companies or companies with prospective quotation in order to create a win-win situation that will ensure Nigeria’s resources are used to develop the capital market, which will in turn bolster national economic development.

He noted that the Nigerian stock market does not reflect the size of the economy with the major sectors of the economy not represented in the stock market.

“The representation in the stock market of the oil industry, agriculture because of its subsistence nature, telecommunications and wholesale and retail trade accounting for over 72 per cent of the economy in 2012 is either totally absent or spotty at best,” Mobolurin said.

He said that in achieving Nigeria’s quest to be the leading capital market in Africa, there are things that government and its appointed managers of the economy must do to complement efforts of the capital market regulators and operators.

“The quest for leadership is not what can be achieved by the industry without active commitment of the government. What is however expected of government does not go beyond the ambit of good governance and sound economic management to which every government should ordinarily be committed. If government does what it is expected to do normally, the market hopefully in addressing the weaknesses addressed earlier will push the market to the desired end. The only demand on government is to pay a little more attention to the elements that could accelerate the growth of the capital market because the rapid economic growth is also hinged on such efforts,” Mobolurin said.

According to him, the oil and gas industry is largely an industry operated by foreign investors who are not listed in the Nigerian market and the government while listing of even 15 per cent  out of government’s average of 55 per cent participation in the industry will be a significant boost to the market.

Mobolurin noted that government’s divestment programmes have also not faithfully or scrupulously looked to the market for exit pointing out that even though government’s privatization programme had a clearly enunciated policy to ensure broad ownership of companies being divested of government’s ownership, the enforcement has been patchy.

“Indeed many of the enterprises for which some years of deferment of their IPOs were granted had never come to the market. Neither has government made granting of its special privileges it grants businesses subject to such companies being broadly owned. I would like to argue that government henceforth should only give duty waiver, if at all, and pioneer status tax holiday only to companies that are public companies and are broadly owned or are owned by private equity firms that are committed to exiting through the market,” Mobolurin said.

He recalled that the original Pioneer Status Act required that all companies applying for pioneer status must be public companies and this was the situation until one of the military regimes removed the clause, which underscored the non-transparency in government affairs that was fostered under such governments.

“The same argument that informed the then requirement for the granting of pioneer status is valid today. Indeed, in 1960 the stock market was so small that it was unrealistic to enforce any provision of broad ownership by Nigerians. Today, we have a stock market and an OTC for those do not seek listing on the stock exchange. Therefore, there are now mechanisms to ensure liquidity for all classes of securities in transparent and regulated trading platforms. This argument can be extended to all significant licensed activities, like telecommunications, oil and gas and power. Why should some other economies derive all the benefits of the purchasing power of Nigerian consumers? Imagine our market carrying the capitalization of MTN, Airtel, Etisala and Globacom!” Mobolurin noted.

According to him, while companies must not be forced to seek listing, those companies seeking privilege of being granted a licence of concession or special privileges that an ordinary company is not entitled to must make it possible for the ordinary Nigerian to participate in the business with them.

He added that government should also promote public companies because public quotation engenders transparency and good corporate governance as the public scrutiny of accounts ensures that the public can assess the accounting and tax practices of companies.

Mobolurin said there is a need for a complete review of the financial markets architecture to make them into a diversified but integrated system for national economic development.

He called for the constitution of a presidential panel, which mandate would be to review the financial system and offer the pathway to a diversified but integrated and balanced financial market that can accelerate economic development in Nigeria.

He noted that all institutions in the market, including the regulators, must scrupulously work within the ambit of the law and resist the temptation to usurp powers they do not have simply because they have power leverage over other institutions adding that institutions of the market must forge close relationships to advance the progress of the market with mutual respect for themselves.