Market Recovers from Three-week Losing Streak on Bargain Hunting

Goddy Egene
It was a big relief for equities investors last week as the market appreciated due to bargain hunting in the banking sector after three consecutive weeks of losses.

The market had been bearish since February and also opened the month of March with continued decline. However, the slide was halted last week as the Nigerian Stock Exchange (NSE) All-Share Index (ASI) appreciated by 0.24 per cent to close at 26,276.61, while market capitalisation went up by 0.27 per cent to be at N13.695 trillion.

When the bearish trend persisted at the beginning of the week, some investors were contemplating approaching the NSE to introduce the Index Circuit breaker to check the downward trend in the market.
A leading investor told THISDAY that given free-fall the market was experiencing, the NSE might be convinced to trigger circuit breaker, which is a trading halt used to guard against sharp fluctuations on the market.

Circuit breakers are designed to give the market an opportunity to take a break and adjust to all available information before re-opening the market. They provide protection against excessive volatility during continuous trading sessions of the market. Circuit breakers provide the opportunity for greater information dissemination and assimilation to all market participants, including investors to facilitate better informed investment decision making during periods of high market volatility.

The NSE in 2016 amended its circuit breaker rule, saying it would be triggered during periods of extraordinary volatility in the equities market in order to maintain an orderly market, and to allow liquidity to re-aggregate.

The NSE set the threshold at five per cent for the first trigger and a further five per cent for the second trigger in the same direction. According to the exchange, the purpose is to dampen extraordinary volatility swings on market prices by providing time to restore equilibrium between buyers and sellers.

“It has the objective of dampening both market upswings and market downswings, and will complement the price limits on individual stocks already in place. The Exchange, through the Index Circuit Breaker Rule, seeks to promote just and equitable principles of trade, remove impediments to and improve the mechanism of a free and open market; and protect investors and the public interest,” the exchanged had explained.

And when the bears were sending panic to the market, the prominent investor told THISDAY that his association was making moves towards the possibility of the exchange triggering the circuit breaker if the market continues to plunge.
“We are making some consultations to see how the market can be stabilised. We are shall be talking to the exchange on this and if the need arises, the circuit breaker could be used to bring back stability to the market,” the investor said.

However, the market recovered last week propelled by banking stocks. As a result, while the NSE ASI rose 0.21 per cent, the NSE Banking Index went up by 4.7 per cent. The NSE Insurance Index gained 0.9 per cent.
Conversely, the NSE Consumer Goods Index shed 5.9 per cent, followed by the NSE Industrial Goods Index that shed 4.0 per cent. The NSE Oil & Gas Index closed 0.7 per cent lower.

Commenting on the market performance, analysts at Cordros Capital said in spite of the gain, investors should remain cautious.
“Despite the market closing positive this week, sentiments remain weak. Hence, we advise investors to trade cautiously, taking positions in fundamentally justified stocks,” they said.

But another one factor that boosted the performance of the market last week was the successful meetings members of the NSE held to give their final approval for the exchange to be demutualised.

Speaking on the development, some market stakeholders told THISDAY that the demutualisation of the exchange will improve its corporate governance structure, service delivery and lead to better market regulation, while creating more liquidity for the market operators.

For instance, a former Council Member of the NSE and Managing Director/CEO of said APT Securities and Funds Limited, Mallam Garba Kurfi said the demutualisation would lead to greater investor participation in the governance of the exchange and unlock capital for stockbrokers who may decide to trade their shares for liquidity.

“The demutualisation of the NSE would make the exchange to function better like its peers such as the Johannesburg Securities Exchange (JSE), Nairobi Securities Exchanges that have already undergone the process. It will bring global best practice. In all, it is a good thing and all of us are going to be happy at the end of the day because it is going to unlock more capital for the market. For instance, if I place shares as collateral, I can trade and make money, we are pleased this is coming after so much delay,” he said.

Market turnover
Meanwhile, investors traded 1.814 billion shares worth N26.008 billion in 23,494 deals last, up from 1.547 billion shares valued at N24.263 billion that exchanged hands the previous week in 21,646 deals.

The Financial Services industry led the activity chart with 1.382 billion shares valued at N16.909 billion traded in 16,275 deals, thus contributing 76.2 per cent and 65.02 per cent to the total equity turnover volume and value respectively. The Services sector followed with 98.557 million shares worth N263.837 million in 369 deals. The third place was ICT industry, with a turnover of 89.782 million shares worth N598.016 million in 800 deals.

Trading in the top three equities, Guaranty Trust Bank Plc, Zenith Bank Plc and United Bank for Africa Plc accounted for 784.482 million shares worth N14.610 billion in 9,337 deals, contributing 43.25 per cent and 56.17 per cent to the total equity turnover volume and value respectively.

Top price gainers and losers
The price movement chart showed that 36 equities appreciated higher than six equities in the previous week, while 25 equities depreciated in price, lower than 58 equities in the previous week.
UACN Property Development Company Plc led the price gainers with 22.8 per cent, trailed by Skyway Aviation Handling Company Plc with 20.6 per cent. UAC of Nigeria Plc chalked up 18.9 per cent, just as Law Union & Rock Insurance Plc garnered 16.6 per cent.

FBN Holdings Plc gained 13.8 per cent, just as Sterling Bank Plc and Wema Bank Plc appreciated by 12.9 per cent. Double One Plc went up by 9.9 per cent, while May & Baker Nigeria Plc and NPF Microfinance Bank Plc rose 9.6 per cent and 9.4 per cent in that order.

Conversely, Unilever Nigeria Plc led the price losers with 13.3 per cent, trailed by Lafarge Africa Plc with 11.9 per cent. Nestle Nigeria Plc and Ardova Plc shed 10 per cent apiece, just as CAP Plc went down by 9.9 per cent. Omatek Ventures Plc and Okomu Palm Plc dipped by 9.7 per cent each.
Other price losers included: Berger Paints Nigeria Plc (9.6 per cent); Glaxosmithkline Consumer Nigeria Plc (9.5 per cent) and NCR (Nigeria) Plc (9.5 per cent).