Banking Stocks Send Equities Market Southwards

WEEKLY REPORT

By Goddy Egene and Eromosele Abiodun

Despite closing the last two days of last week in the green, the Nigerian equities market returned southward last week on the back of poor performance by banking stocks. The Nigerian Stock Exchange (NSE) Banking Index fell by 7.9 per cent as investors dumped bank stock in most days of the week to lock in profit. Besides, some investors reacted as Skye Bank announced profit warning, fuelling speculations that regulatory headwinds and high loan impairments will continue to hinder banks’ ability to make profits.

Apart from the above, prices adjustments for dividends also contributed to the negative trading recorded last week. At the close of trades for the week, the NSE All-Share Index and market capitalisation depreciated by 1.52 per cent to close at 25,507.09 and N8.774 trillion respectively.

Similarly, all other Indices finished lower during the week, with the exception of the NSE Premium Index, NSE Oil/Gas Index, NSE Lotus II and the NSE Industrial Goods Index that rose by 3.16 per cent, 2.06 per cent, 0.76 per cent, and 0.25 per cent respectively, while the NSE ASeM closed flat.

It was a brief trading week as the market opened for four days, having observed Monday 28th of March, 2016 as Public Holiday declared by the Federal Government of Nigeria to mark Easter celebrations.

The previous week, the Nigerian equities market had narrowly survived the negative reaction that trailed decision of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to increase rates.

The MPC had during the week resolved to raise the Monetary Policy Rae (MPR) otherwise known as the interest rate, to 12 per cent from 11 per cent. It also increased bank’s Cash Reserve Ratio (CRR) to 22.5 per cent from 20 per cent.
In their reaction, analysts’ advised investors to employ a cautious approach while gradually building their portfolio.

“While we advise cautious trading in the immediate, we see the current depressed price level post markdown for dividend as providing a good entry point for investors with a medium to longer-term horizon. As such, we advise that investors utilise this opportunity to gradually build position in quality names for a medium to long term investment horizon,” said analysts at Investment One Limited.

Daily Performance Analysis

The market had opened the week in the red last Tuesday, dragged by negative sentiment towards banking (0.8 per cent) and industrial stocks (2.54 per cent) as mark down for dividend in both Guaranty Trust Bank Plc and Zenith Bank Plc led to a bearish close. The benchmark NSE-ASI shed 2.40 per cent to end the session at 25,277.29 points, corresponding to a market capitalisation of N8.69 trillion.

However, excluding the markdown of Zenith Bank Plc and Guaranty Trust Bank Plc, the loss in index would be 1.37 per cent. In similar vein, Industrial tickers shed 2.54 per cent dragged by loss in Dangote Cement Plc (1.99 per cent) while banking tickers lost 0.8 per cent. Consumer Goods tickers also closed negative falling by 1.99 per cent on account of sell-off on NB (4.99 per cent). On the positive, oil and gas ticker gained 0.29 per cent. Dangote Sugar Plc (4.91 per cent) led the list of 11 stocks on the gainers chart while Zenith Bank Plc (13 per cent) led the list of 27 stocks closing the session negative.

On Wednesday, losses in key banking and consumer goods stock drove the NSE-ASI index to a negative close, shedding 0.52 per cent to end the session at 25,411.69 points, with market capitalisation dipping by N45billion berthing at N8.65 trillion. A decline in price of market bellwether stocks including Nigerian Breweries Plc, UBA Plc and Zenith Bank Plc was largely to blame for the day’s outcome, cancelling out gains in Dangote Cement Plc, Lafarge Africa Plc and Seplat Plc. Volume and value of trade were, however, impressive rising by almost 80 per cent and 60 per cent each, compared to the previous session. As such, investor staked N2.14 billion on over 500 million units of stocks exchanged in 3,225 deals. On a sectoral basis, performance was in the red across board with the exception of Industrial tickers which rose 1.65 per cent buoyed by gain in Dangote Cement Plc (1.23 per cent). Banking index shed 2.62 per cent as the impact of markdown for dividend weighed on momentum for banking stocks, followed by Consumer Goods tickers with 1.98 per cent return on account of bearish sentiment toward Nigeria Breweries Plc (4.32 per cent).

The Nigerian equities market capitalisation and NSE-ASI index rose by 0.64 per cent as key sub-sector indices closed positive. Both NSE-ASI and market capitalisation ended the session at 25,306.22 points and N8.71trillion.Gains in Dangote Cement Plc, FBN Holdings Plc and International Breweries Plc, drove the rise in market capitalisation, cancelling out losses in Lafarge Africa Plc, Zenith Bank Plc and Guaranty Trust Bank Plc. Similarly, sectoral performance improved relative to previous session as gains were recorded in consumer goods trackers (0.25 per cent), Industrial Goods index (0.25 per cent) as well as Oil and Gas tracker (0.19 per cent). Only the Banking index closed lower losing 0.83 per cent. However, market turnover declined as investor staked N1.93 billion in 264 million units of stocks relative to the previous session’s trade with value estimated at N2.1 billion. A breakdown of activity showed banking sector stock led by FCMB Group and Fidelity Bank Plc took the lion share of trade, accounting for 84 per cent and 48 per cent of volume and value of trade respectively.

The market ended the week on a positive note last Friday as the NSE ASI increased further by 0.79 per cent to close at 25,507.09 points, compared with the gain of 0.64 per cent recorded the prior day. The appreciation recorded in the share prices of Access Bank Plc, FBN Holdings Plc, Dangote Cement Plc, Zenith Bank Plc and Oando Plc were mainly responsible for the gain recorded in the Index. Similarly, the market capitalisation appreciated by 0.79 per cent to close at N8.77 trillion, compared with the depreciation of 0.64 per cent recorded the previous day to close at N8.70 trillion.

Market Turnover

In all, a turnover of 1.262 billion shares worth N6.427 billion in 12,274 deals were traded last week by investors on the floor of the exchange in contrast to a total of 1.552 billion shares valued at N10.453 billion that exchanged hands the previous week in 14,994 deals.

The Financial Services Industry led the activity chart with 1.022 billion shares valued at N3.734 billion traded in 8,227 deals; thus contributing 80.95 per cent and 58.11 per cent to the total equity turnover volume and value respectively.

The Agriculture Industry followed with 105.069 million shares worth N129.307 million in 155 deals. The third place was occupied by the Conglomerates Industry with a turnover of 40.758 million shares worth N58.455 million in 361 deals.
Trading in the top three equities– FCMB Group Plc, Sterling Bank Plc and Livestock Feeds Plc accounted for 382.145 million shares worth N424.424 million in 1,019 deals, contributing 30.27 per cent and 6.60 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 25,738 units of Exchange Traded Products (ETPs) valued at N522,245 executed in 39 deals, compared with a total of 118,976 units valued at N1.267 million transacted the prior week in 20 deals.
A total of 22,030 units of Federal and State Government Bonds valued at N25.368 million were traded in 8 deals compared to a total of 91,918 units of Federal Government Bonds valued at N100.479 million transacted the previous week in seven deals.

Gainers and Losers

Meanwhile, the price movement chart of the NSE showed that a total of 24 equities appreciated in price during the week, higher than 22 equities of the previous week. Thirty-seven equities depreciated in price, lower than 38 equities of the previous week, while 128 equities remained unchanged lower than 129 equities recorded in the previous week.

The top 10 gainers were: Total Nigeria Plc (N13.81), Julius Berger Nigeria Plc (N3.30), International Breweries Plc (N1.69), Vitafoam Plc (70 kobo), Oando Plc (58 kobo) FCMB Group Plc (9 kobo), NASCON Allied Plc (39 kobo), Dangote Sugar Plc (30 kobo), AIICO Insurance (4 kobo) and Champion Breweries Plc (14 kobo).

Conversely, the top 10 losers included: Nigerian Breweries Plc (N11.31), Guinness Nigeria Plc (N8.93), Zenith Bank Plc (N2.02), Guaranty Trust Bank Plc (N1.71), United Capital Plc (70 kobo), Tiger Branded Consumer Plc (34 kobo), Transcorp Plc (19 kobo), UBA Plc (60 kobo), Trans Nationwide Express (12 kobo), and Nigerian-German Chemicals Plc (45 kobo).