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Why You Should Monitor Insider Dealings as a Nigerian Stock Trader

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Nigerian Stock

Why All Nigerian Stock Traders Must Monitor Insider Dealings

Since the Nigerian Stock Exchange (NSE) mandated listed companies to disclose insider dealings, a lot has changed as traders and stakeholders now have an idea of who is buying what, at what price level and quantity being bought.

However, despite the level of details, most traders are yet to realise the importance of these details to stock performance. For instance, in the last one month, Herbert Wigwe, the Chief Executive Officer and Managing Director, Access Bank, has been buying the company’s stock in large quantity and acquired a total of 7.532 million in the last one month.

On July 8th, the bank announced its wholly-owned subsidiary, Access Bank Zambia Limited was in talks to acquire Cavmont Bank Limited. While this may still be wrong on the part of the CEO who has seemingly taken advantage of his knowledge of the ongoing deal, it allows traders to model their strategies in line with executive actions/purchases by those with undivulged fundamental details of a certain stock.

Presently, Excelsior Shipping Limited, a substantial shareholder of Flour Mills of Nigeria Plc, has acquired almost 3.5 million of the company’s shares in the last one month, while Blakeney LLP, a substantial shareholder of UAC of Nigeria Plc bought 40 million units of the company’s shares last month.

The new disclosure policy will now allow stock traders to have an understanding of corporate actions by those previews to details they do not have.

The good news is, Investors King has devoted a complete section to insider dealings. Just click here every morning to know who is buying what, at what price level and the sequence and pattern of purchase.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Nigerian Exchange Limited

Nigeria’s Equities Market Gains 0.11%, Adds N62 Billion in Value

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stock - Investors King

The Nigerian equities market posted a 0.11 percent gain on Tuesday as increased buy-side actions boosted the market’s value by N62 billion.

This positive movement reflects renewed investor confidence and activity in the market.

Leading the charge were stocks like United Capital, UACN, and Cutix. Investors engaged in 8,151 deals, exchanging 368,392,413 shares worth N7.424 billion.

Among the top advancers, United Capital saw a significant rise from N30 to N33, adding N3 or 10 percent.

Cutix also performed well, climbing from N5.08 to N5.58, an increase of 50 kobo or 9.84 percent.

Sunu Assurances and Cornerstone Insurance were other notable gainers, with Sunu Assurances increasing from N1.29 to N1.39, adding 10 kobo or 7.75 percent, and Cornerstone moving from N1.95 to N2.10, up 15 kobo or 7.69 percent.

UACN also saw a substantial gain, rising from N14.15 to N15.20, an addition of N1.05 or 7.42 percent.

The market’s positive return year-to-date (YtD) now stands at 33.84 percent, with a marginal increase of 0.02 percent for the month. So far this week, the market has grown by 0.41 percent.

Key stocks such as Zenith Bank, Access Holdings, GTCO, Jaiz Bank, and UBA were actively traded, indicating strong investor interest.

At the close of trading on the Nigerian Exchange Limited (NGX), the All Share Index (ASI) and equities Market Capitalisation rose from the previous day’s low of 99,966.28 points and N56.608 trillion to 100,075.59 points and N56.670 trillion, respectively.

This uptick in market activity and value reflects growing optimism among investors, buoyed by positive corporate earnings and macroeconomic indicators.

As Nigeria’s market continues to evolve, stakeholders are hopeful for sustained growth and stability in the coming months.

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Nigerian Exchange Limited

NGX All Share Index Climbs to 99,966.28 Points

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Nigerian Exchange Limited - Investors King

The Nigerian Exchange Limited (NGX) rebounded on Monday as the All Share Index (ASI) rose by 0.30%, closing at 99,966.28 points.

This positive development came after a five-day streak of negative closes, bringing renewed optimism to the market.

Investors saw N168 billion gains with stock market capitalization increasing from the previous low of N56.440 trillion to N56.608 trillion.

Among the standout performers were stocks such as Ikeja Hotel, Cutix, RedStar Express, and Sunu Assurances.

Ikeja Hotel saw its stock price rise from N6.35 to N6.95, adding 60 kobo or 9.45%. Cutix experienced an impressive increase from N4.62 to N5.08, gaining 46 kobo or 9.96%.

RedStar Express moved up from N4.05 to N4.38, an increase of 33 kobo or 8.15%, while Sunu Assurances rose from N1.19 to N1.29, adding 10 kobo or 8.40%.

The market’s positive return year-to-date (YtD) increased to 33.70%, though there has been a slight decrease of 0.09% in the month-to-date performance.

Despite this, the overall sentiment remains optimistic, with investors hoping for continued positive momentum.

GTCO, Access Holdings, FCMB Group, Japaul Gold, and UACN were among the most actively traded stocks.

A total of 362.42 million shares worth N7.367 billion were exchanged in 8,405 deals, showcasing robust trading activity and investor interest.

Market analysts attribute the rebound to renewed investor confidence and positive sentiments surrounding key stocks.

“The significant gains in major stocks like Ikeja Hotel and Cutix have boosted investor morale, leading to a broader market recovery,” said a market analyst.

The Nigerian stock market’s recovery comes amid a challenging economic environment, with investors closely monitoring developments both locally and globally.

The positive performance of the NGX ASI on Monday serves as a beacon of hope for market participants, indicating potential stability and growth in the coming weeks.

As the market continues to respond to economic indicators and corporate earnings reports, investors will be keenly watching for sustained positive trends and opportunities for profitable investments.

The NGX’s performance on Monday sets a promising tone for the rest of the week, with market participants eagerly anticipating further gains and stability in the Nigerian stock market.

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Bonds

Corporate Bond Issuance by Nigerian Companies Plummets 98% Amid High Yield Demands

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Bonds- Investors King

The value of corporate bonds issued by Nigerian companies has dramatically decreased by 98% between the last quarter of 2022 and the first quarter of 2024, according to recent data from FMDQ Securities Exchange Limited.

This significant drop is attributed to high yield demands from investors, reflecting a cautious stance in the lending market.

In the first quarter of 2024, the value of corporate bonds fell to N5.5 billion from N249.4 billion in Q4 2022, marking a staggering N244 billion decrease.

Similarly, the issuance of commercial papers (CPs) by firms also saw a sharp decline, dropping to N331.81 billion in Q1 2024 from N537.47 billion in Q1 2023, representing a 38% slump over the period.

Corporate bonds and commercial papers are crucial financial instruments used by companies and governments to raise capital for various projects.

While bonds typically offer periodic coupon payments, CPs do not provide such payments, making them less attractive in a high-yield environment.

Opeyemi Babalola, portfolio manager at Comercio Partners Asset Management, explained, “Companies are reluctant to take on debt at these levels. When one-year Nigerian Treasury Bills (NTBs) yields are at 25 percent, these companies would have to issue commercial papers at a premium to that.”

He noted that some companies have issued commercial papers at rates above 30%, which is unsustainable for maintaining profit margins.

On the corporate bond side, Babalola added, “There has hardly been any recent issuance because it’s not very prudent for any chief financial officer to advise their company to lock in long-term debt at the current high-yield levels.”

The sharp rise in yields on both government and private instruments in Nigeria’s fixed income market is a result of the Central Bank of Nigeria (CBN)’s aggressive monetary policy stance.

The CBN has been focusing on reducing financial system liquidity and hiking interest rates to curb inflation.

Consequently, the yield on one-year Nigerian treasury bills rose to 26.76% in March 2024 from 9% in January 2024, peaking at 27.33% in March 2024.

To tackle rising inflation, the Monetary Policy Committee, led by Yemi Cardoso, has raised interest rates three times this year by a total of 750 basis points.

This included an initial 600 basis point increase to 24.75% from 18.75% last year, followed by a 150 basis point increment to 26.25% in May 2024.

Several companies, including Afrinvest West Africa Limited, FBN Quest Merchant Bank, UAC of Nigeria, and Coleman Technical Industries Limited, issued CPs in the first quarter of 2024.

These issuers were primarily from the financial services, agriculture, manufacturing, health, pharmaceuticals, and retail sectors.

Another popular financing option for Nigerian companies is bank loans. Currently, commercial bank loan rates range from 30% to 40%, reflecting the high borrowing costs due to the central bank’s policy actions.

Gbolahan Ologunro, portfolio manager at FBNQuest, noted that while it is relatively cheaper for companies to raise funds through bond issuances or commercial papers compared to loans, the macroeconomic environment has reduced the appetite for such fundraising activities.

“The cost has gone up, and the macroeconomic situation does not support such attractive returns on investment, given the high level of cost associated with fundraising activities,” Ologunro said.

The running costs for businesses are increasing, and companies are struggling to raise prices without affecting demand.

“The purchasing power of consumers is declining because of rising inflation. So, it puts these companies in a very delicate position. You will see all these reflected in the earnings of publicly listed companies in the consumer space once we enter peak results season by the end of July,” Babalola added.

FMDQ data shows that corporate bonds’ value declined by 88% to N5.50 billion in Q1 2024 from N43.50 billion in Q4 2023.

Coronation Research predicts that short-term rates for T-bills and commercial papers will remain high for the rest of the year, without causing bond rates to rise significantly.

Joshua Joseph, fixed-income analyst at CSL Stockbrokers Limited, attributed the decline in private borrowing to economic uncertainty and high business costs.

He explained that the increased credit risk has led investors to demand higher premiums, making bank loans a more attractive option despite their high rates.

“As a result of this high cost of borrowing, interest expense is at high levels, and companies that can’t fully pass the cost to end consumers might be declaring huge losses,” Joseph added.

The Nigerian corporate bond market faces significant challenges as companies navigate the high-yield environment and rising borrowing costs.

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