Stakeholders in the Nigerian capital market have lamented the lull in market activities and the huge lose recorded in the Nigeria Stock Exchange last week, where investors lost over N455 billion in the first five tradings days of the year. The huge losss according to stakeholders was due to delayed policy pronunciations and direction by the Federal Government. They however expressed optimism that the recent visit by the International Monetary Fund, IMF boss, Christine Lagarde would spur the Federal Government to quickly take actions that would enhance the economy and boost the stock market in particular.

Analysis of activities on the Nigeria Stock Exchange (NSE) last week showed that market capitalisation, which represents the total value of securities traded on the NSE declined by over N455 billion to close trading last Friday at N9.295 billion from N9.850 trillion it opened during the first trading day of the year, 2016 .

On Monday market capitalisation shed N93.521billion to close at N9.757 trillion; On Tuesday it dropped by over N93 billion to close at N9.664 trillion; On Wednesday it shed N317 billion to close at N9.347 trillion.

However, on Thursday, market capitalisation rebounded to appreciate by over N30 billion to close at N9.377 trillion, while on Friday market capitalisation declined by over N82 billion to close at N9.295trillion. In the same vein, another stock market gauge, the All Share Index declined by 1,6‘13.86 points or 5.63 per cent in five trading days from 28,642.25 it opened the market to close last Friday at 27,028.39 points.

The breakdown show that the Index on Monday shed 371.93 points to close at 28,370.32 points; On Tuesday the Index declined by 268.18 points to close at 28,102.14 points; On Wednesday it dropped by 911.38 points to close at 27,180.76 points; On Thursday, the index rebounded and went up by 85.42 points to close at 27,266.18.

Further analysis showed that that 899.604 million shares worth N7.669 billion in were traded by investors in 14,164 deals on the floor of the exchange in contrast to a total of 2.965 billion shares valued at N9.364 billion traded penultimate week in 7,174 deals.

The Financial Services Industry (measured by volume) led the activity chart with 764.790 million shares valued at N4.858 billion traded in 8,904 deals; thus contributing 85.01 percent and 63.34 percent to the total equity turnover volume and value respectively. The Conglomerates Industry followed with 40.164 million shares worth N100.471 million in 626 deals. The third place was occupied by the Consumer Goods Industry with a turnover of 40.006 million shares worth N1.707 billion in 2,116 deals.

Trading in the top three equities namely – Access Bank Plc, Guaranty Trust Bank Plc and United Bank for Africa Plc.(measured by volume) accounted for 339.027 million shares worth N2.800 billion in 3,116 deals, contributing 37.69% and 36.51 percent to the total equity turnover volume and value respectively.

Also traded during the week under review were a total of 12,016 units of Exchange Traded Products (ETPs) valued at N2.050 million executed in 25 deals, compared with a total of 60,171 units valued at N484,396.36 transacted last week in 20 deals.

Furthermore, Seventeen (17) equities appreciated in price during the week under review, lower than forty-two (42) equities in the penultimate week. Fifty (50) equities depreciated in price, higher than twenty-two (22) equities in the penultimate week, while one hundred and twenty-three (123) equities remained unchanged, lower than one hundred and twenty-six (126) equities recorded in the previous week.

Top Ten Price Gainers

Okomu Oil Palm Company Plc led the top ten price gainers recording 19.64 percent price appreciation. Others are Vono Products Plc (18.52%); Learn Africa Plc (15.49%); Lafarge Africa (8.47%); Cement Company of Northern Nigeria (8.02%); Fidson Healthcare Plc (8.00%); Berger Paints Nig. Plc (5.00%); E-transact International Plc (4.93); Portland Paints and Products Nig. Plc (4.79%) and Ikeja Hotels Plc (4.47%).

Top Ten Price Gainers

Skye Bank Plc led the top ten price losers recording 25.32 percent price loss. Others are Unity Bank Plc (24.11%); Nigerian Breweries Plc (19.49%); Tiger Branded Consumer Goods Plc (16.81%); Honeywell Flour Mills Plc (15.61%); Eterna Plc (13.66%); Union Bank of Nigeria Plc (13.04%); Transnational Corporation of Nigeria (12.50%); Glaxosmithkline Consumer Nig. Plc (12.28%); FBN Holdings Plc (11.89%).

Stakeholders’ reactions

Commenting on these developments, Chairman Proactive Shareholders of Nigeria, PROSAN Mr. Oderinde Taiwo in said “The Nigerian stock market is experiencing this negative response because the Muhammadu Buhari led Federal Government policy direction came out late, even on some vital issues, there are no policy direction yet. We should know that it is government’s policy direction that attract foreign and core investors into any market. So that delay in the appointment of ministers and pronouncement of policy direction really affected investment decisions in our market.

Continuing, he said “With the recent visit of the IMF boss in Nigeria, there is likely going to be positive changes in the economy and our market in particular once the Federal Government is able to execute some of the initiatives recommended to it. All these and more will likely attract investors to the market.”

Another stakeholder, Mr. Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria, PSAN said “The decline in our market is not only affected by factors within the economy but also global issues. The fall in global oil has been a major factor affecting Nigerian economy. So our market has been resilient, though there are issues that the regulators in our market need to address. When a finger of an investor is burnt, he or she will be careful to release his or her other fingers to be burn. That is what is really affecting the market.”

Continuing, he said “The decline we are experiencing in our market now is somehow normal as some investors are selling their shares to meet up with other expectations. Remember, Christmas and new year holidays are over and people had spend money and they needed cash to pay for their children’s school fees and other essential needs, that is why the prices of equities are dropping.

But, there is hope that the market will rebound once investors see clearer picture of the Federal Government‘s policy direction. The Buhari administration has started fighting corruption and tackling insecurity. So these are some of the things that will attract investors to invest in our economy.”’

In his own view, Mr. Emeka Madubuike, Chairman, Association of Stockbroking Houses of Nigeria (ASHON), said there is need to rid the economy of every uncertainty to inject confidence in the investors. He explained that riding the market of uncertainty requires discipline across all strata of the economy.

“The market mirrors the economy; if the economy is down, the market will be down. For me I think what the market requires is a situation where the economy has a lot of discipline. It does not matter, for instance, how much the budget is; but it is the implementation that is critical and it requires a lot of discipline across all levels for us to have an economy that is devoid of uncertainty.

“There are too many uncertainties in the economy and uncertainty does not give confidence for investment because if you are investing money, you are doing so not for today, but for tomorrow. When people are not sure of what will happen tomorrow, they may likely not invest; so that is why we are having this lull.”

He added: “From my own point of view, there need to be a lot of accountability in the ways things are done in our system. There needs to be consistency in the way government is run, in the ways policies are pursued; there need to be consistency. And there need to be reward and punishment depending on what people have done and people have not done. As soon as investors see a steady pattern, a lot more investment will come.”

Madubuike explained that the market is driven by two factors – fear and greed; that’s what drives the market. “When investors don’t see where the economy is going, they won’t invest. That is when the fear factor comes in, but if they are sure that the economy is doing well, then greed will come in. When do you exit, when do you come in. Those are the two factors that drive the market”.

Analysts’ views

Mr. Tola Odukoya, Managing Director, Asset Management & Research, Dunn Loren Merrifield said the current fall in the global equity markets is essentially made in China. “The wider story is that China’s economic growth is slowing and there are concerns that the transition to a slower and more sustainable rate of growth might be disruptive. This is largely due to decline in manufacturing triggered by slump in exports and a surprise devaluation of the Yuan. This among other considerations is raising concerns about whether the Chinese economy is slowing down more sharply than thought” Odukoya stated.

Continuing, he said, “Though we reckon that it’s not just about China, decline in commodity prices such as crude oil and copper have also prompted investors to take fright over signs of waning financial crisis. To better put, there is certainly a possibility of “safe haven” effect in other markets as the Chinese stock price falls has made investors more wary about risks. Hence, shares around the world have followed the China’s market slowly.

In addition, the increase in interest rates in the US is also sucking money out of riskier markets.” He affirmed that while investors are keeping a close watch on China, there are signs that investors are retreating, therefore making money to be pouring out of major markets around the world which is almost similar to the global financial crisis of 2008 and 2009.

“Whilst we maintain that improved global economic data amongst other considerations are some of the key factors that will lift the global market performance considerably, we are of the view that market unpredictability which prevailed for the most part of 2015 will be sustained in the first quarter of 2016 and even beyond,” he said.

In its own part, Vetiva Capital Management Limited (“Vetiva”) stated “ Global stock markets rallied in wake of the news which suggests to us that this “lift-off” had been priced in by markets and emerging economies exposed to global financial flows are better positioned to deal with further tightening in global liquidity conditions contrary to the “taper tantrum” episode of summer 2013. In this scenario, the rise in U.S. long term yields will likely remain well contained, with interest rate differentials only marginally lower, thus, capital flows to emerging and frontier markets would be modest.

However, another scenario is that better than expected data on U.S. GDP growth, employment and inflation triggers a deviation from the assumed interest rate path, leading to a more rapid rise in the policy rate. This could create financial market volatility with spillover effects to emerging economies, in particular, those exposed to foreign currency denominated debt. Overall, tighter global liquidity conditions are likely to increase vulnerabilities of economies with BOP fragilities, especially in oil exporting countries.”

Commenting further, it stated “We expect demand for fixed income securities will open on a healthy note, largely supported by domestic banks and pension funds (PFAs). In the second half of the year however, we foresee uptick in yields as supply begins to outweigh demand, nonetheless, we expect the uptrend in yield to be capped. We anticipate that the demand would be largely weighted on the short end of the yield curve – particularly T-bills and short dated bonds as the market remains risk averse.

Overall, we anticipate a relatively steep yield curve for most part, indicating an expectation for a rise in yields. We foresee an upward shift in the yield curve by an average 200bps across 2016.” “With the NSE All Share Index, ASI returning -17% in 2015, closely in line with our scenario analysis for Brent crude oil price at $45/bbl, our outlook for the equity market in 2016 remains anchored on the direction of oil prices.

As such, we think the equity market is headed for another tough year as oil prices stay “lower for longer” with economic concerns ranging from currency to corporate earnings ; Overshadowing seemingly low stock prices; we expect heightened volatility for much of the year.

We re-iterate the strong correlation of the Nigerian equity market to oil prices and with the price of Brent crude oil hovering $38/bbl coming into 2016, we think losses will be less steep this year with the potential for a positive year close given our expectation for oil prices to rebound to between $50 – $60/bbl in the second half of the year.”

Global Stocks:

Meanwhile, global markets stabilised last Friday, with U.S. stocks halting a two-day rout and the dollar advancing after China shored up its markets and a surge in U.S. payrolls boosted optimism in the economy. Oil fell below $33 a barrel.

The Standard & Poor’s 500 Index stopped a selloff that has erased $4 trillion from global equities this year as Chinese authorities set a higher yuan reference rate and intervened in its equities markets. The renewed selling in crude sent energy shares lower around the world, damping the equities rebound. The Bloomberg Dollar Spot Index held to a 0.4 percent advance as the yen weakened with gold.

Volatility in Chinese markets spurred a global selloff in riskier assets as concern deepened over the ruling Communist Party’s ability to manage an economic slowdown. U.S. payroll growth surged in December, capping the second-best year for American workers since 1999. While that was further evidence of a resilient job market that prompted the Federal Reserve to raise interest rates, wages grew slower than forecast, adding to disinflation concerns stoked by plunging commodities prices.

“There will remain some jitters about China until they get get through a week or more without having a precipitous drop,” said Peter Jankovskis, who helps oversee $1.9 billion as Co-Chief investment officer of Lisle, Illinois-based OakBrook Investments. “Given what’s going on in China right now, the market is looking for economic growth and evidence that there’s strength in the U.S. economy. We’re still walking on egg shells, but this is definitely going to help turn a corner.”

Specifically, the Standard & Poor’s 500 Index rose 0.3 percent at 10:47 a.m. in New York. The index almost erased a gain of 0.8 percent before stabilizing. The gauge ended the first four days of 2016 lower by 4.9 percent, its worst start in data going back to 1928.

“The big concern right now is what’s happening overseas, particularly in China,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $110 billion. “Today there was a very strong labor market report that relieved some of that concern. Investors typically sell the first rally after a big selloff, because it’s the first chance they can get out on an uptick. That’s why the first rally after a deep decline is hard to get underway.”

The 292,000 gain in payrolls exceeded the highest forecast in a Bloomberg survey and followed a 252,000 increase in November that was stronger than previously estimated, a Labor Department report showed Friday. The median forecast in a Bloomberg survey called for a 200,000 advance.

In Europe, the Stoxx Europe 600 Index fluctuated. The gauge is down about 4.5 percent in the week, the worst performance since August, when China’s shock devaluation of the yuan roiled global markets.

Emerging Markets

The People’s Bank of China set the yuan’s daily fixing at 6.5636 per dollar. That’s 0.5 percent higher than Thursday’s onshore effective closing price in the spot market and ends an eight-day reduction of 1.42 percent. The securities market regulator abandoned the circuit breaker after plunges of 7 percent in the CSI 300 triggered automatic trading halts on Monday and Thursday in its first week.

The MSCI Emerging Markets Index advanced 0.3 percent, rebounding from a six-year low. Benchmarks in China, Brazil, South Korea, Thailand and Hungary gained at least 0.6 percent. Russian markets remained closed for holidays. The CSI 300 Index of large-cap companies in Shanghai and Shenzhen advanced 2 percent and the Hang Seng China Enterprises Index climbed 1.1 percent from a four-year low.

India’s rupee and South Africa’s rand led gains in emerging-market currencies, climbing at least 0.4 percent against the dollar. Brazil’s real strengthened 0.3 percent.

Currencies

The yen weakened 0.8 percent and the Swiss franc slid 1 percent against the dollar. The euro fell 1 percent after German industrial production unexpectedly dropped in November. Output, adjusted for seasonal swings and inflation, slid 0.3 percent from October, when it gained a revised 0.5 percent, data from the Economy Ministry in Berlin showed.

Bonds

U.S. Treasury 10-year notes fell for the first time in seven days, sending yields up two basis points to 2.17 percent. China may be selling Treasuries to raise money as part of its efforts to stabilize markets, said Yoshiyuki Suzuki, head of fixed income in Tokyo at Fukoku Mutual Life Insurance, which has $55.9 billion in assets. China’s foreign-exchange reserves shrank last year for the first time since 1992, according to central bank figures on Thursday.

Yields on euro-denominated junk-rated corporate debt rose to the highest since November 2012 on Thursday. The average yield climbed 12 basis points to 5.99 percent, according to a Bank of America Merrill Lynch index.

Commodities

Oil fell 0.8 percent to $33 a barrel and contracts on Brent crude dropped 0.4 percent to $33.62 in London. Gold pared its best weekly advance since August, falling 1 percent to $1,098.23 an ounce. The precious metal has outperformed other commodities this week as investors sought haven assets.

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