The Nation Newspaper

Tag: equities

  • Equities relapse with N125b loss

    After two consecutive positive trading sessions, Nigerian equities suffered a major relapse on Tuesday as investors sought to rebalance their portfolios and reevaluate their considerations. With nearly three losers to every gainer, equities recorded a net capital loss of N125 billion within the five-hour trading session. It was the largest day-on-day decline in the past seven weeks.

    Aggregate market value of all quoted equities at the Nigerian Stock Exchange (NSE) slumped to N12.789 trillion as against its opening value of N12.914 trillion. The All Share Index –the benchmark index that tracks share prices at the Exchange, also declined by 0.96 per cent to close at 36,953.41 points to close at 37,312.28 points.  The average year-to-date return for Nigerian equities slipped to 37.50 per cent.

    With 32 losers to 12 gainers, sectoral indices underlined the market-wide decline in share prices. The NSE Industrial Goods Index and NSE Banking Index dipped by 1.4 per cent each. The NSE Consumer Goods Index also recorded above-average decline of 1.3 per cent while the NSE Insurance Index dropped by 0.1 per cent. However, the Oil & Gas Index was the only contrarian index with a marginal gain of 0.1 per cent.

    Nestle Nigeria led the losers with a loss of N40 to close at N1,250. Guinness Nigeria followed with a drop of N2.01 to close at N100. Unilever Nigeria dropped by N2 to close at N38. Lafarge Africa and Dangote Cement lost N1.45 each to close at N50 and N236.55 while Zenith Bank declined by N1.16 to close at N23.68.

    On the positive side, Flour Mills of Nigeria led the gainers with a gain of 89 kobo to close at N34.89. Nigerian Breweries followed with a gain of 77 kobo to close at N139.75. Forte Oil rose by 65 kobo to close at N48.62 while Okomu Oil Palm added 21 kobo to close at N68.20 per share.

    Total turnover stood at 238.36 million shares valued at N3.42 billion in 4,238 deals. The most active stock was FBN Holdings, which traded 75.8 million shares valued at N541.28 million.

    “Following the day’s unprecedented loss, we expect bargain hunting to drag market performance positive in subsequent trading sessions,” Afrinvest Securities stated.

  • Equities’ return rises to 37.1% amidst rally

    Investors in Nigerian equities have earned more than one-third of the value of their portfolios in capital gain this year as increased demand for quoted shares drove the average year-to-date return for Nigerian equities to 37.11 per cent at the weekend.

    With nearly two gainers for every loser, a largely bullish market during the week left investors with net capital gain of N182 billion, representing a week-on-week return of 1.45 per cent. All sectoral indices closed positive, underlining the market-wide rally that saw investors upping market orders for small to mid-cap and large-cap stocks.

    The All Share Index (ASI)-the benchmark pricing index for the Nigerian equities market, rose by 1.45 per cent to close the week at 36,848.17 points as against its week’s opening index of 36,320.93 points. Aggregate market value of all quoted equities also improved from the week’s opening value of N12.502 trillion to close the week at N12.684 trillion, representing an increase of N182 billion.

    Year-to-date return analysis at the weekend showed that most equities investors have made substantial returns on their investments so far this year, with investors in banking stocks and other large-cap stocks ahead of others.

    The Nigerian Stock Exchange (NSE) Banking Index, which tracks the most active and influential banking sector, rose by 1.41 per cent last week to pushed the average year-to-date return for the sector to 67.89 per cent. The NSE 30 Index, which tracks the 30 most capitalised companies, posted a gain of 1.25 per cent last week to increase its year-to-date return to 41.25 per cent. The NSE Industrial Goods Index appreciated by 0.66 per cent last week to close with a year-to-date return of 32.9 per cent.

    The NSE Consumer Goods Index rose marginally by 0.05 per cent to close with year-to-date return of 31.24 per cent, while the NSE Insurance Index recorded the highest gain of 7.90 per cent last week to build up average year-to-date return for the sector to 17.93 per cent. However, with previous steep declines in share prices of many oil majors, including Forte Oil and 11 Plc, formerly Mobil Oil Nigeria Plc, the NSE remained with negative year-to-date return of -6.90 per cent, in spite of above average gain of 1.82 per cent last week.

    Total turnover stood at 1.56 billion shares worth N13.50 billion in 18,409 deals last week compared with a total of 1.49 billion shares valued at N15.11 billion traded in 14,549 deals in the previous week. The financial services sector remained atop activities chart with a turnover of 1.37 billion shares valued at N6.51 billion in 10,880 deals; representing 87.76 per cent and 48.19 per cent of the total equity turnover volume and value respectively. The consumer goods sector staged a distant second with a turnover of 70.5 million shares worth N5.64 billion in 3,398 deals while the conglomerates sector placed third with 58.78 million shares worth N141.93 million in 706 deals.

    The three most active stocks were Diamond Bank Plc, Zenith International Bank Plc and Transnational Corporation of Nigeria Plc, which altogether accounted for 985.76 million shares worth N2.84 billion in 3,401 deals, representing 63.39 per cent and 21.04 per cent of the total equity turnover volume and value respectively.

    Also traded during the week were a total of 60 units of Exchange Traded Products (ETPs) valued at N2,266 in six deals compared with a total of 2,000 units valued at N34,000 traded in a deal in the previous week.

    In the sovereign debt segment, a total of 1,041 units of Federal Government bonds valued at N1.040 million were traded in 10 deals compared with a total of 2,360 units valued at N2.029 million traded in seven deals two weeks ago.

    There were 41 gainers to 23 losers last week compared with 38 gainers and 26 losers recorded in the previous week. However, 107 stocks were unchanged. AXA Mansard Insurance recorded the highest gain-in percentage terms, of 25.5 per cent to close at N2.51. Cement Company of Northern Nigeria followed with a gain of 20.1 per cent to close at N9.68.

  • Lafarge Africa, Nigerian Breweries drag equities to N19b loss

    Nigerian equities traded on a tight balance of bargain-hunting and profit-taking yesterday at the Nigerian Stock Exchange (NSE), but losses by two highly capitalised companies-Lafarge Africa and Nigerian Breweries, weighed down the overall market position.

    With 19 gainers and losers each, the market appeared to be on a momentary pause after the recent streak of rallies with investors looking up to third quarter earnings of companies to determine the next major move of the market. Many companies indicated yesterday that they have scheduled the board meeting to consider their third quarter earnings, usually the last process before the release of the earnings reports for non-financial companies.

    Lafarge Africa, Nigeria’s second largest cement company, which had indicated a rights issue, declined by N2.39 to close at N54.50. Nigerian Breweries- Nigeria’s second most capitalised quoted company, followed with a loss of N1.10 to close at N168.90.

    With these, the aggregate market value of all quoted companies dipped by N19 billion from its opening value of N12.678 trillion to close at N12.659 trillion. The All Share Index (ASI)-the main index that tracks share prices at the Exchange, dropped marginally by 0.15 per cent to close at 36,776.60 points as against its opening index of 36,831.93 points.  The average year-to-date return slipped marginally to 36.85 per cent.

    Total turnover however stood above average with the exchange of 353.19 million shares valued at N3.26 billion in 4,201 deals. The three most active stocks were Diamond Bank, with 215.76 million shares; Fidelity Bank, 15 million shares and FCMB Group, with 14.59 million shares.

    Other top losers were C & I Leasing, with a drop of 18 kobo to close at N1.74; FBN Holdings, which lost 6.0 kobo to close at N6.08 while Diamond Bank and Custodian and Allied declined by 5.0 kobo each to close at N1 and N3.60 respectively.

    On the upside, Flour Mills of Nigeria, which announced ongoing arrangements for a supplementary capital raising, led the contrarian stocks with a gain of N1.13 to close at N29. Cement Company of Northern Nigeria followed with a gain of 86 kobo to close at N9.32. PZ Cussons Nigeria rose by 50 kobo to close at N23.74. Cadbury Nigeria added 40 kobo to close at N10.40 while Northern Nigeria Flour Mills chalked up 27 kobo to close at N5.77 per share.

  • Equities gain N285b bargain-hunting

    Equities gain N285b bargain-hunting

    Nigerian equities netted more than N285 billion last week as investors increased bargain-hunting for value stocks ahead of impending inflow of the third quarter corporate earnings.

    All major indices at the Nigerian Stock Exchange (NSE) showed a largely positive market with sustained rally in the last three consecutive trading sessions.

    The All Share Index (ASI), the benchmark pricing index for the Nigerian stock market, closed the weekend with average-week-on-week gain of 2.49 per cent, equivalent to capital gain of N304 billion. However, the cancellation of shares by United Bank for Africa (UBA) reduced the net capital gain to N285 billion. A total volume of 2.080 billion ordinary shares of UBA were cancelled during the week, pursuant to a resolution passed at UBA’s annual general meeting in April 2016 to cancel the shares held by its Staff Share Investment Trust Scheme (SSITS). The total outstanding ordinary shares of UBA before the cancellation was 36.28 billion, while the total outstanding ordinary shares after the cancellation is 34.199 billion ordinary shares.

    The sustained rally pushed the average year-to-date return for Nigerian equities to 35.15 per cent at the weekend.

    The ASI rose from its week’s opening index of 35,439.98 points to close the week at 36,320.93 points. Aggregate market value of all quoted equities closed the weekend higher at N12.502 trillion as against the week’s opening value of N12.217 trillion.

    Nearly all sectoral indices also closed positive, setting the fourth quarter on a positive trajectory. The NSE 30 Index posted a return of 2.77 per cent. The NSE Banking Index appreciated by 3.17 per  cent. the NSE Consumer Goods Index rose by 1.42 per cent. The NSE Oil and Gas Index appreciated by 1.80 per cent while the NSE Consumer Goods Index led the rally with a week-on-week return of 6.15 per cent. However, the NSE Insurance Index depreciated by 1.21 per cent.

    Total turnover stood at 1.49 billion shares worth N15.11 billion in 14,549 deals last week, higher than a total of 1.33 billion shares valued at N14.09 billion traded in 14,703 deals in the previous week. The financial services sector led the activity chart with 1.29 billion shares valued at N10.12 billion traded in 8,334 deals; representing 86.3 per cent and 66.99 per cent to the total equity turnover volume and value respectively. The consumer goods sector staged a distant second on the activities chart with 89.259 million shares worth N3.154 billion in 2,760 deals. The conglomerates sector ranked third with a turnover of 49.36 million shares worth N113.74 million in 491 deals.

    Banks-traditionally most active stocks-again dominated the activities chart with the three most active stocks- FCMB Group Plc, Diamond Bank Plc and FBN Holdings Plc accounting for 659.042 million shares worth N1.312 billion in 1,933 deals, representing 44.14 per cent and 8.69 per cent of the total equity turnover volume and value respectively.

    A deal was also struck for a total of 2,000 units of Exchange Traded Products (ETPs) valued at N34,000 during the week as against a total of 274 units valued at N636,148 traded in18 deals in the previous week.

    In the sovereign debt segment, a total of 2,360 units of Federal Government Bonds valued at N2.03 million were traded this week in seven deals, compared with a total of 7,424 units valued at N6.69 million traded in 18 deals in the previous week.

  • Equities’ rally gathers momentum with N143b gain

    nigerian equities sustained their rally yesterday as increased bargain-hunting left investors with net capital gain of N143 billion within five hours of trading at the Nigerian Stock Exchange (NSE).

    With more than two gainers for every loser, benchmark indices at the Exchange showed average gain of 1.17 per cent, pushing the average year-to-date return to 33.11 per cent. The positive market situation was driven by widespread buy sentiments as investors sought to take positions ahead of expected inflow of third quarter corporate earnings.

    Aggregate market value of all quoted equities rose from its opening value of N12.171 trillion to close at N12.314 trillion. The All Share Index (ASI)-the value-based index that tracks share prices, appreciated to 35,773.98 points as against its opening index of 35,358.57 points.

    Most sectoral indices trended upward with the NSE Industrial Goods Ion the double with average gain of 2.8 per cent. The NSE Banking Index appreciated by 0.8 per cent while the NSE Consumers Goods Index inched up by 0.5 per cent. On the downside, the NSE Insurance Index and NSE Oil & Gas Index dropped by 0.4 per cent each.

    There were 31 gainers to 14 losers.  Dangote Cement-the most capitalised quoted company, led the gainers with a gain of N5 to close at N215. Nestle Nigeria followed with a gain of N2.99 to close at N1,223.01. Presco rose by N2.95 to close at N61.95. Lafarge Africa appreciated by N2.08 to close at N54.10. Nigerian Breweries rose by N2 to close at N163.60 while Total Nigeria added N1.50 to close at N241 per share.

    On the negative side, Mobil Oil Nigeria led the losers with a drop of N8.28 to close N161.72. MRS Oil and Gas dropped by N1.51 to close at N28.88. PZ Cussons Nigeria declined by 68 kobo to close at N23.55. Cadbury Nigeria dipped by 54 kobo to close at N10.26. Ecobank Transnational Incorporated lost 35 kobo to close at N16.75. Unilever Nigeria dropped by 18 kobo to close at N43.43 while Africa Prudential dipped by 10 kobo to close at N3.31 per share.

    The momentum of activities also improved with exchange of 317.4 million shares valued at N2.9 billion. Skye Bank was the most active stock with 94.32 million shares worth N48.14 million. United Bank for Africa followed with 35.75 million shares valued N321.39 million while Transnational Corporation of Nigeria placed third with 26.05 million shares worth N34.93 million.

    “Performance in the near term will remain driven by investor expectation of third quarter 2017 earnings results. Accordingly, we expect the market to close the week in the green,” analysts at Afrinvest Securities stated.

  • Equities open Q4 with N46b loss

    Nigerian equities reopened yesterday with a tinge of profit-taking as considerable selloff in many large-cap stocks depressed the overall market position to a net loss of N46 billion. After rallying a net capital gain of N756 billion in the third quarter, the fourth quarter started with portfolio rebalancing aimed at monetizing capital gains and realigned portfolio composition.

    The main value indices at the Nigerian Stock Exchange (NSE) showed a largely negative market situation, with average day-on-day decline of 0.38 per cent, equivalent to net capital depreciation of N46 billion. This depressed the average year-to-date return to 31.37 per cent.

    The All Share Index (ASI)-the value-based index that tracks share prices at the Exchange, declined to 35,306.09 points as against its opening index of 35,439.98 points. Aggregate market value of all quoted equities also dropped from its opening value of N12.217 trillion to close at N12.171 trillion.

    The negative market situation was due to preponderance of losers to gainers, especially within the highly capitalised stocks. There were 22 losers to 18 gainers while almost three-quarters of quoted companies were unchanged.

    Nestle Nigeria-the highest-priced stock at the Exchange, led the losers with a loss of N5.11 to close at N1,215. Nigerian Breweries-the second most capitalised stock, followed with a loss of N3 to close at N162. Dangote Cement-the most capitalised quoted company, trailed with a drop of N2.99 to close at N210. Forte Oil lost N1.80 to close at N48.10. PZ Cussons Nigeria declined by N1.27 to close at N24.23. GlaxoSmithKline Consumer Nigeria dropped by N1 to close at N21. Cadbury Nigeria dipped by 53 kobo to close at N10.46 while Ecobank Transnational Incorporated lost 30 kobo to close at N17.20 per share.

    The momentum of activities however improved with above-average turnover. Investors traded 634.32 million shares valued at N5.79 billion in 3,850 deals. Banks dominated the activities chart. FCMB Group was the most active stock with a turnover of 370.40 million shares worth N378 million. FBN Holdings placed second with 33.99 million shares valued at N193.59 million while Guaranty Trust Bank ranked third with 33.48 million shares worth N1.34 billion.

    On the positive side, Total Nigeria led the gainers with a gain of N4 to close at N235. Guinness Nigeria followed with addition of N3.49 to close at N98.50. Lafarge Africa rose by N1.34 to close at N52.02. Zenith Bank added 61 kobo to close at N24.01. Stanbic IBTC Holdings chalked up 51 kobo to close at N40.01 while Dangote Sugar Refinery and Union Bank of Nigeria rose by 23 kobo each to close at N13.93 and N5.99 respectively.

  • Equities regain rally with N53b gain

    Nigerian equities rebounded yesterday as large-cap stocks rallied the market to a net capital gain of N53 billion. Benchmark indices at the Nigerian Stock Exchange (NSE) showed average day-on-day gain of 0.44 per cent, representing net capital appreciation of N53 billion.

    The All Share Index (ASI)-the benchmark index for the equities market, rose from its opening index of 34,951.27 points to close at 35,103.40 points. Aggregate market value of all quoted equities also rose from its opening value of N12.048 trillion to close at N12.101 trillion.

    The upturn was driven by widespread gains, especially within the medium and large-cap stocks including Nestle Nigeria, Dangote Cement, Zenith Bank, International Breweries and Stanbic IBTC Holdings.

    There were 24 gainers against 22 losers. Champion Breweries recorded the highest price gain of 8.14 per cent to close at N2.39 per share. Neimeth International Pharmaceuticals followed with a gain of 4.62 per cent to close at 68 kobo. Linkage Assurance appreciated by 4.55 per cent to close at 69 kobo per share. Fidson went up by 4.52 percent to close at N3.24 per share while C & I Leasing appreciated by 4.32 per cent to close at N1.45.

    On the other hand, Morison led the losers’ chart by 8.33 per cent to close at 66 kobo per share. UACN Property Development Company followed with a decline of five per cent to close at N2.85. University Press depreciated by 4.81 per cent to close at N2.57 per share. Caverton Offshore Support Group declined by 4.59 percent to close at N1.04 while AG Leventis Nigeria declined by 4.41 per cent to close at 65 kobo per share.

    Turnover meanwhile slowed down considerably as volume traded declined by 72.74 per cent to 136.40 million shares worth N1.27 billion in 2.860 deals. Transactions in the shares of Jaiz Bank topped the activity chart with 35.85 million shares valued at N26.1 million. Meyer Paints followed with 20.01 million shares worth N14.01 million. FBN Holdings traded 6.69 million shares valued at N36.78 billion. Diamond Bank traded 5.43 million shares valued at N6.04 million while Access Bank recorded 4.88 million shares worth N46.2 million.

    “Despite the rebound in ASI, we note that market breadth is yet to comfortable crossover to the positive territory. The low level of activity as shown in weaker volume and value traded further suggests sentiment for equities remains low; thus, we expect the market to trade sideways in subsequent sessions pending the release of third quarter earnings,” Afrinvest Securities stated.

     

  • Equities rally N166b as bargain-hunting thickens

    Equities rally N166b as bargain-hunting thickens

    Market valuation and momentum of activities improved considerably at the Nigerian Stock Exchange (NSE) last week as investors increased bargain-hunting transactions ahead of the third quarter earnings of quoted companies. Benchmark indices showed a week-on-week average gain of 1.38 per cent, equivalent to net capital gain of N166 billion at the end of the week.

    Turnover volume and value rose by 22.2 per cent and 16.2 per cent respectively as investors appeared to seek a balanced portfolio of large-cap and penny stocks. The average year-to-date return improved to 32.05 per cent at the weekend.

    Aggregate market value of all quoted equities rose from the week’s opening value of N12.068 trillion to close at N12.234 trillion. The All Share Index (ASI)-the main price index that doubles as Nigerian sovereign equities index, increased from the week’s opening index of 35,005.57 points to close weekend at 35,488.81 points.

    Most sectoral indices closed on the positive side. The positive overall market situation was driven largely by rallies within the large-cap banking and industrial goods companies. The NSE 30 Index-which tracks Nigeria’s 30 most capitalised stocks, rose by 1.03 per cent last week. The NSE Banking Index posted a return of 2.39 per cent. The NSE Industrial Goods Index appreciated by 2.94 per cent while the NSE Insurance Index rose by 1.41 per cent. However, the NSE Consumer Goods Index declined by 0.23 per cent while the NSE Oil and Gas Index slumped by 3.05 per cent.

    There were 25 gainers against 35 losers last week as against 23 gainers and 45 losers recorded two weeks ago. Low-priced stocks dominated the gainers’ list. Linkage Assurance recorded the highest gain, in percentage terms, of 11.86 per cent to close at 66 kobo. Continental Reinsurance rose by 9.79 per cent to close at N1.57. Guaranty Trust Bank appreciated by 7.03 per cent to close at N39.60. C & Leasing rose by 6.72 per cent to close at N1.27. Skye Bank rose by 5.77 per cent to 55 kobo while Unilever Nigeria Plc rose by 5.50 per cent to close at N44.10 per share.

    On the downside, Nigerian Enamelware recorded the highest drop of 16.65 per cent to close at N23.23. Caverton Offshore Support Group dropped by 9.17 to close at N1.09. Neimeth International Pharmaceuticals declined by 8.57 per cent to close at 64 kobo. Transnational Corporation of Nigeria lost 7.52 per cent to close at N1.23. Cutix slipped by 7.33 per cent to close at N2.53 while AIICO Insurance dropped by 6.90 per cent to close at 54 kobo.

    Total turnover improved to 1.096 billion shares worth N17.86 billion in 16,070 deals last week as against a total of 896.618 million shares valued at N15.368 billion traded in 17,048 deals in the previous week. The financial services sector topped the activity chart with 880.597 million shares valued at N13.614 billion traded in 8,994 deals; representing 80.33 per cent and 76.2 per cent of the total equity turnover volume and value respectively. The industrial goods sector staged a distant second position with 69.17 million shares worth N676.25 million in 881 deals while the consumer goods sector recorded a turnover of 49.29 million shares worth N2.87 billion in 3,077 deals.

    The three most stocks were Guaranty Trust Bank Plc, Access Bank Plc, Jaiz Bank Plc, which altogether accounted for 450.567 million shares worth N10.942 billion in 1,834 deals, representing 41.1 per cent and 61.27 per cent of the total equity turnover volume and value respectively.

    Also traded during the week were a total of 58 units of Exchange Traded Products (ETPs) valued at N90,475 executed in five deals compared with a total of 1,265 units valued at N145,720 transacted last week in eight deals.

    A total of 178 units of Federal Government bonds valued at N163, 407 were traded in two deals compared with a total of 5,290 units valued at N5.030 million traded in 15 deals in the previous week.

  • Equities lose N46b as investors await CBN’s decisions

    Nigerian equities started this week on a downtrend as investors await the decisions of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), which is scheduled to meet next week. Most price changes ended on the negative while volume of activities hovered around average at the Nigerian Stock Exchange (NSE).

    Benchmark indices for the equities market ended the five-hour trading session with average day-on-day decline of 0.38 per cent, equivalent to net capital depreciation of N46 billion. The decline further moderated the average year-to-date return to 29.76 per cent.

    Aggregate market value of all quoted equities at the NSE dropped from its opening value of N12.068 trillion to close at N12.022 trillion. The All Share Index (ASI)-the main price index for the equities market, declined from its index-on-board of 35,005.57 points to close at 34,873.07 points.

    The decline was driven by profit-taking transactions and portfolio readjustments, especially within the oil and gas and consumer goods sectors. The NSE Oil & Gas Index declined by 3.0 per cent. The NSE Consumer Goods Index dropped by 1.2 per cent while the NSE Industrial Goods Index dipped by 0.8 per cent. However, the NSE Banking Index rose by 0.9 per cent while the NSE Insurance Index inched up by 0.2 per cent.

    There were 18 losers against 14 gainers yesterday. Seplat Petroleum Development Company led the losers with a drop of N24.03 to close at N456.76. Nigerian Breweries followed with a loss of N5 to close at N170. Presco lost N2.49 to close at N58. Lafarge Africa dropped by 97 kobo to close at N49. Oando slipped by 30 kobo to close at N5.75. FBN Holdings dropped by 19 kobo to close at N5.41 while Access Bank lost 17 kobo to close at N9.73 per share.

    On the upside, Guaranty Trust Bank led the gainers with a gain of N1 to close at N38. Cadbury Nigeria rose by 49 kobo to close at N11. Newrest ASL appreciated by 32 kobo to close at N6.82. Stanbic IBTC Holdings rose by 30 kobo to close at N39.50. Ecobank Transnational Incorporated added 20 kobo to close at N18 while Dangote Sugar Refinery chalked up 7.0 kobo to close at N13.72 per share.

    Total turnover stood at 162.7 million shares valued at N1.5 billion. Access Bank was the most active stock with a turnover of 35.39 million shares valued at N354.24 million. Meyer Paints followed with 18.9 million shares worth N13.24 million while Fidelity Bank ranked third with 18.61 million shares worth N23.99 million.

    Most analysts expected the apex bank, which will meet between Monday September 25 and Tuesday September 26, 2017, to retain its key rates. The apex bank is expected to retain the Monetary Policy Rate (MPR) at 14.0 per cent, the Cash Reserve Ratio at 22.5 per cent, Liquidity Ratio at 30.0 per cent and the asymmetric corridor around MPR at +200 and -500 basis points.

    “Given our medium-term positive outlook on the equities market, the continuous downtrend in performance presents opportunities for investors who were unable to partake in the April-led rally; hence we expect to see an uptrend in market performance as investors source for bargains,” Afrinvest Securities stated in post-trading review.

     

  • Liquidity squeeze threatens settlement at equities market

    Liquidity squeeze threatens settlement at equities market

    The inability of investment firms and stockbrokers to access amenable funds is threatening efficient settlement at the Nigerian equities market.

    Also threatening the market is the constriction of the income sources and portfolio of most operators

    Many stockbroking firms and stockbrokers have been found to be carrying out transactions at the market without adequate funding of their accounts, thus exacerbating settlement risks.

    Sources said at the weekend that stockbrokers were facing liquidity squeeze as many of the operators have been consigned to the low-end of trading income in the absence of large activities in the primary market and access to funding windows.

    Nigerian equities have made average gain of more than 30 per cent so far this year, but several portfolios and investment firms remain under the red.  The equities had lost N3.98 trillion in the past three years. The stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion. Aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE) closed 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.

    A report by NSE obtained at the weekend indicated that non-funding of trading and personal dealing accounts by dealing firms and stockbrokers has been undermining the effectiveness of the settlement system at the stock market.

    The report noted that some operators have been carrying out “transactions without adequately funding their accounts thereby exposing the market to settlement risks”.

    Under the extant rules of the NSE, stockbrokers are expected to fund their accounts in time to ensure effective settlement, in line with the T+3 settlement system at the Exchange.

    Under the “Rulebook of The Exchange 2015”, in order to have a valid transaction, unless otherwise stipulated at the time of a transaction all shares dealt in by a dealing member shall be deemed to be fully paid while all transactions entered into by dealing members shall be for net prices as between the buyer and seller. Also, any offer to buy or sell at a price named, shall be funded.

    Besides, compliance manual and code of ethics require all operators to have adequate processes in place to prevent potential conflicts of interest and insider dealing.

    Authorities at the Exchange have already served a notice that it may henceforth take disciplinary actions against operators of unfunded accounts.

    The Council and management of the Exchange are empowered to exercise their disciplinary powers against a dealing member, where such dealing member “is or has been in breach of clearing and settlement rules”.

    “Consequently, all dealing members and concerned employees as appropriate are strongly cautioned to desist from carrying out trades without adequately funding their trading accounts. Please be advised that the Exchange will not hesitate to bring disciplinary action against erring firms and their authorised dealing clerks,” the notice stated.

    Liquidity enhancement and ways of improving access to funding for market operators were some of the highlights of the discussions at the recent capital market stakeholders’ meeting.

    President, Association of Issuing Houses of Nigeria (AIHN), Mr. Sonnie Ayere recently called for a review of the practice rules and scope of operations of stockbroking firms to make them more viable and profitable.

    According to him, the current operational scope of stockbroking firms limits their access to large pool of capital and restricts them from exploring viable business opportunities that can help them to build up substantial capital and profitability.

    He described stockbroking firms as “endangered species” as they face significant challenges in funding their businesses, since they cannot easily access the short-term money markets.

    “They cannot access formal repo markets for liquidity, and this adversely impacts their sales and trading operations. Liabilities are required to fund an institution’s creation of assets but, institutions under Securities and Exchange Commission (SEC) purview have been denied access to the domestic market’s deepest liquidity pool,” Ayere said.

    He pointed out that without a review and expansion of the current operational scope for stockbroking firms, the securities businesses will remain very small with very little if any, impact on the wider economy.

    According to him, while all financial markets have two types of intermediation-bank-based intermediation and market-based intermediation, only bank-based intermediation works efficiently in Nigeria. Market -based intermediation is much less efficient as operators face significant challenges accessing wide sources of funding and thus have very inefficient sales and trading operations or maturity transformation activities.