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Weak Earnings Reports Push Stock Market Lower – Analysts

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  • Weak Earnings Reports Push Stock Market Lower – Analysts

The weak earnings reports filed with the Nigerian Stock Exchange by some firms last week weighed on the equities market, pushing investors to sell off their shares and take profits, analysts have said.

The market halted its two weeks’ bullish run as the NSE All Share Index declined by 2.51 per cent to settle at 30,636.36 basis points, dragging the year-to-date return to -2.53 per cent.

According to analysts at Meristem Securities Limited, investors took profit off most of the counters following the unimpressive financial scorecards mainly across the consumer goods sector, which contributed to the market’s underwhelming performance.

Investors lost N326bn in January following persistent bearish sentiments.

The market, however, opened on a positive note this month as the ASI gained 0.26 per cent to settle at 30,636.36bps on Friday.

The market capitalisation of equities listed on the NSE increased by N20bn from N11.394tn on Thursday to N11.424tn on Friday.

A total turnover of 1.452 billion shares worth N14.788bn in 19,318 deals were traded last week by investors on the floor of the Exchange in contrast to a total of 1.807 billion shares valued at N17.232bn that exchanged hands in the previous week in 18,332 deals.

The financial services industry (measured by volume) led the activity chart with 1.204 billion shares valued at N10.500bn traded in 12,671 deals, thus contributing 82.95 per cent and 71 per cent to the total equity turnover volume and value, respectively.

The performance in the banking sector was largely negative as it shed previous gains, declining by 2.47 per cent.

This dragged the year-to-date return into the negative territory at -0.59 per cent. With two gainers and 11 losers, the sector breadth stood at 0.18x.

The insurance sector, after two consecutive weeks of positive performance, closed on a bearish note as it declined by 1.35 per cent to close at 121.98bps.

The conglomerates industry followed with 93.206 million shares worth N138.014m in 916 deals.

The third place was occupied by consumer goods industry with a turnover of 71.404 million shares worth N3.170bn in 2,698 deals.

Trading in the top three equities, namely United Bank for Africa Plc, Zenith Bank Plc and Consolidated Hallmark Insurance Plc, (measured by volume) accounted for 447.620 million shares worth N4.453bn in 3,193 deals, contributing 30.83 per cent and 30.11 per cent to the total equity turnover volume and value, respectively.

There were 16 gainers and 50 losers in the market last week, compared to the 40 gainers and 25 losers recorded in the previous week.

The top five gainers were Associated Bus Company Plc, Mutual Benefits Assurance Plc, Beta Glass Plc, Sterling Bank Plc and UACN Property Development Company Plc, which saw respective gains of 24.14 per cent, 10 per cent, 9.09 per cent, 8.41 per cent and 8.18 per cent.

The top five losers were Consolidated Hallmark Insurance Plc, Niger Insurance Plc, Dangote Flour Mills Plc, Ikeja Hotel Plc and Academy Press Plc, whose respective share prices shed 17.14 per cent, 15.38 per cent, 10.77 per cent, 10.71 per cent and 10 per cent.

Analysts at Vetiva Capital Management Plc said, “In line with trend in the past few weeks, we see the possibility of a recovery in the market this week driven by bargain hunters.

“That said, though we expect cautious sentiment to remain prevalent ahead of the elections, we foresee select fund managers taking positions in beaten down stocks as the elections draw closer.”

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

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Finance

Bank of Ghana Holds Key Interest Rate at 13.5%

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Ghana’s central bank on Monday kept its main interest rate unchanged at 13.5% with concerns over rising inflation balanced out by optimistic Covid-19 recovery forecasts, Governor Ernest Addison said in a statement.

The Ghanaian economy grew by just 0.4% last year – its slowest rate since 1983. But it has gained ground in 2021, expanding 3.1% in the first quarter and 3.9% in the second.

The bank’s Monetary Policy Committee sees Ghana’s overall economic outlook continuing on an upward trajectory despite inflation having risen for a fourth month in a row in August.

“Developments continue to point to a sustained recovery in economic activity following the downturn at the peak of the pandemic,” Addison said.

“Given these considerations, and the fairly balanced risks to inflation and growth in the outlook, the committee decided to keep the policy rate unchanged,” he added.

Ghana’s consumer price inflation was at 9.7% year-on-year in August, with food inflation, the largest contributor to the country’s overall inflation rate, rising for a third straight month.

Although the inflation rate remains within the central bank’s targeted band of 8% plus or minus 2 percentage points, Addison cautioned that a close monitoring of the situation would be necessary to swiftly mitigate any impacts to local markets.

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Banking Sector

Stanbic IBTC: Working Towards Net Zero Emissions

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As part of the Stanbic IBTC 2021 Sustainability Week event, Stanbic IBTC Holdings PLC, a member of Standard Bank Group, organised a sustainability webinar tagged “Working Towards Net Zero Emissions”.

The objective of the virtual event which was held on Monday, 20 September 2021 via the Group’s #Bluetalks platform, was to promote public awareness on the impact of climate change and provide practical methods towards reducing carbon footprints and achieving net zero emissions.

Delivering his opening remark at the event, Dr. Demola Sogunle, Chief Executive, Stanbic IBTC Holdings PLC said: “We all cannot continue to ignore our responsibility in the current changes to the climate. Through small adjustments leading to a more conscientious and sustainable lifestyle, each one of us can take part in the global climate protection project. As reflected in one of our strategic value drivers SEE (Social, Environmental and Economic) Impact, Stanbic IBTC is focused on ensuring it does business responsibly whilst positively impacting the society and environment where we operate. As such, the 2021 Stanbic IBTC Sustainability Week is an opportunity for us to advance awareness around practical steps we are taking, and more which we can take, to make our world a better place.”

The webinar featured seasoned experts including Temesoye Jack, Group Head, Sales, Banks, Gas Stations and SMEs, Starsight Energy; Professor Kenneth Amaeshi, Chair in Sustainable Finance and Governance at the European University Institute (EUI) and Oluwasegun Olajuwan, Group Chief Executive Officer, THLD Group.

Temesoye Jack stated that renewable energy sources like solar energy can help countries attain net zero emissions. She said, “Solar energy can help us move towards reducing greenhouse emissions. We need to have more energy efficient offices nationwide. However, this shift will not happen overnight as it is a gradual process.”

She explained that Nigeria has barely scratched the surface when it comes to renewable energy and emphasised that sustainable practices do not have to end in the office but must be observed in all areas of the country

Prof. Kenneth Amaeshi highlighted the importance of harmonising technology upgrades and sustainable growth to reduce carbon emissions. He explained that sustainability at the global level is targeted at mitigating the adverse effects of climate change.

According to Prof. Kenneth, “From recent surveys, it is clear individuals are ready to go green. The affordability of clean energy will determine if we will be able to reduce carbon emissions.”

Speaking on practical steps that can be adopted to help in achieving net zero emissions, Oluwasegun Olajuwan, Group Chief Executive Officer, THLD Group, said “Autogas has been around for 40 years, and Nigeria is not fully embracing it. It is safer, cleaner and more cost effective than fossil fuel and diesel. Vehicle conversion from fuel to Autogas is affordable. CNG (Compressed Natural Gas) is more efficient than fuel. The use of CNG in vehicles mitigates the emission of nitrous oxide and hydrocarbons by 40% and 90% respectively, compared to petrol.”

Omolola Fashesin, Head of Sustainability at Stanbic IBTC, thanked the panellists for the informative session, which helped create awareness of alternative sources that can help reduce carbon emissions. She urged the participants to apply learnings from the webinar to take practical steps to reduce their carbon footprint.

Finally, in his closing remarks, Kunle Adedeji, Executive Director Finance and Value Management stated that “at Stanbic IBTC, we are committed to facilitating a better and more sustainable future for all. We have already commenced various workstreams that will help us on the journey towards Net Zero emissions. Some of these include understanding our energy sources, consumption patterns and possible areas for efficiency; adoption of cleaner energy sources in our office locations (leveraging Autogas and Solar energy solutions); and adoption of Tree Planting programs which will help us with carbon sequestration.”

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Loans

Credit to Private Sector Rises to N33.26 Trillion in August 2021

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The Central Bank of Nigeria (CBN) has disclosed that credit to private sector went up by N498.6billion in August to N33.26trillion from N32.8trillion reported in July 2021.

The N33.36trillion figure announced by the CBN is a new record that was fuelled by banks, among others increased lending to real sector.

CBN in its Money and Credit Statistics for the period revealed that credit to private sector in January was N30.65trillion and dropped by 0.47 per cent to N30.5 trillion in February.

However, in March, it closed at N31.44trillion and crossed the N32.1trillion mark in April to N32.12 trillion.

In addition, the CBN reported N32.63trillion and N33.36trillion credit to private sector May and June respectively.
Analysts believe banks lending to real sector played a critical role in the recent increase in Nigeria’s Gross Domestic Product (GDP).

An economist and Chief Executive Officer, BIC Consultancy Services, Dr Boniface Chizea said he is optimistic that banks credit to real sector, amid severe challenges are yielding positive results. According to him, “The volume of credit which seems humongous will deliver expected dividends despite perceived inhospitable investment environment. We should therefore remain confident and hopeful that desired impact must be felt if not immediately then in due course.

“We must also accept the fact that we would be challenged if we want to isolate the direct impact of the credit on the economy. So, we must remain assured that the credit is not money down the drain.”

On his part, Economist & Private Sector Advocate, Dr Muda Yusuf said the growth in credit to private sector is laudable.

He noted that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.

Yusuf said: “My guess is that a significant percentage of this have been given to large corporates, multinationals and high end medium enterprises. The CBN has done a lot in lending to agriculture, but the quality of the lending is an issue. Reports indicate high default rates in agricultural credit, especially the anchor borrowers’ scheme.

“Monetary intervention is imperative for real sector development. But it is not sufficient to guarantee the desired outcomes of growth and productivity. The context in which businesses are operating is as important as the funding, if not even more important. The totality of the investment environment must be right for sustainable real sector development to be achieved.”

He added, “Therefore, to complement the credit to the private sector, the other factors that should reckoned with include infrastructure quality, especially power, roads and railways. There are also issues around the quality of the regulatory environment, the foreign exchange policy regime, the ports situation, volatility of the naira exchange rate, the tax environment and the security situation.

“These are not things monetary intervention can solve. It takes an impactful fiscal policy intervention to fix these problems. Some of the issues border on economic reforms that need to happen. Engagements between the private sector stakeholders and policymakers is critical to achieving sustainable development of the economy.”

The Governor, CBN, Mr. Godwin Emefiele had in his communiqué at the end of August Monetary Policy Committee (MPC) meeting said the committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019.

According to him, “Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”

He expressed further that the MPC members noted the unequivocal importance of credit growth to the sustained recovery of output and the moderation in price development as supply improves.

“It thus, called on the Bank to maintain adequate surveillance on banks to ensure compliance with its extant credit policy, while ensuring that they are not unduly exposed to credit risks.

“The Committee also noted the relevance of the Bank’s suite of interventions to the overall system credit, urging its continued use to fund sectors with high employment-generating capacity,” he said.

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