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Investors Gain N114bn on NSE in March



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  • Investors Gain N114bn on NSE in March

At the backdrop of a lack-luster performance of equities in the first quarter 2017 (Q1’17) there seems to be a recovery in the last month of the quarter, as stock market review for the period indicated that investors recorded N114 billion gains at the end of March. The market lost N330 billion in Q1’17.

The consumer goods sector towered above all other sectors in terms of return-on-investment recording 8.1 per cent return, while the banking sector came farther down at the bottom of the ladder with 0.1 per cent return, a development capital market operators attributed to low investors’ confidence in banking stocks as the profits recorded so far are tied to foreign exchange gains. Consumer goods sector, according to them are in line to benefit from further foreign exchange reforms as the Naira continues to strengthen against the dollar.

Also, the financial services sector driven by activities in the insurance stocks, buoyed activities in the market in terms of volume traded with the sector accounting for 14.13 billion of total traded volume during the month.

Specifically, at the close of trading session on Friday, the market capitalisation which represent investors’ wealth appreciated by N114 billion to N8.83 trillion from N8.72 trillion it closed on Wednesday, March 1, 2017. This represents 1.3 per cent increase. The other market metric, the All Share Index, rose to 25, 516.34 basis points from 25,183.10 points.

Financial services leads volume

The financial services sector driven by activities in Unity Kapital Assurance Plc, Continental Reinsurance Plc and Diamond Bank Plc accounted for 14.23 billion units of traded volume and N40.69 billion value of traded stocks out of 19.76 million shares valued at N227.24 billion traded during the month. This indicated, 38.9 per cent and 82.5 per cent of both volume and value traded respectively. The consumer goods sector followed with 753.54 million shares worth N32.97 million in 30,666 deals, while oil and gas sector closed as the third, accounting for 646.75 million units valued at N111.98 million in 20,140 deals.

Operators React

Explaining why the high returns recorded in the consumer goods sector in comparison to the paltry returns in the banking sector, Mr. David Adonri, Managing Director/CEO, Highcap Securities, stated: “Investors probably have low confidence because the banking sector is closely tied to value of the currency and a lot of them declared profit based on foreign exchange gains. And foreign investors believe that is not sustainable. They believe that if situation changes, those profits will turn to nothing.

That is why they are still sceptical about the sector and they also believe that the rating agencies have, in recent times, been downgrading Nigerian banks and as a result, investors’ confidence is not very high in that sector.”

On the consumers good sector, he said: “As Nigeria is moving out of stagflation, that is the sector that will be turned around much more easily than the other sectors because as the exchange rate becomes favourable, it means that their productive activity and those businesses will be turned around.”

Agreeing with him, Chinenye Anyanwu, Managing Director/CEO, Dependable Securities, said that investors’ disposition towards the banking sector is manifested in their reaction to Zenith Bank’s dividend declaration that attracted less than expected patronage to the shares. “Can you imagine Zenith Bank paying the amount of dividend it paid this year, yet the market did not react appropriately. It is that same feeling that these results look like smoke-screen, it looks like they are not sustainable and people are cautious to trade in that area.”

He also argued that the consumer goods sector has always performed better than the banking sectors most of the times because the financial services sector is over-regulated.

“Investors believe that things can only get better in the consumer goods sector as the economy keeps improving. The expectation of improvement in the economy causes patronage and investors believe that the sector’s ability to sustain growth is higher,” Anyanwu added.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.