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Stock Market Recap: 2011 Was Year of the Bear

By on January 1, 2012

STOCK MARKET RECAP: 2011, year of the Bear

The Nigerian Stock Exchange in 2011 was the year of the bear. Undoubtedly the stock market held much potential at the onset of the year, with a lot hinging on the resolution of the bad bank crisis, and a return of investor confidence.

Unfortunately the bank crisis did not get resolved until late in the third quarter against expectations that it would actually be finalized in the second quarter. The late resolution kept a lot of market players on the sideline as stock prices embarked on a free-fall.

More hazardous to the fortunes of the market was the departure of the retail investor, most Nigerians are still licking their bruises from the crash of 2008 and 2009. Many lost fortunes, homes, loved ones and their sanity as a result of the extreme erosion of shareholder wealth from the market.

Regulators did nothing to restore confidence or to stimulate the market, and yet they naively expected retail investors to troop back into the market en masse. One would be as surprised as anybody who understands the psyche of the Nigerian consumer, that is once beaten, twice shy, to see them come back so soon. The stock market has assumed wonder bank status with the majority of the people. It would take more than rhetoric from regulators to bring them back.

SECTORIAL BREAK DOWNS

The banking sub-sector was down an average of 45%, with the best performers Stanbic and Spring Banks recording an annual performance of -12% and -11% respectively.

The breweries sub-sector performed a bit better, up 15% over the course of 2011, and best performers Champion, Guinness and Nigerian Breweries recording annual gains of 81%, 31% and 22% apiece.

Lafarge led the cement manufacturers with an annual gain of 5%, whilst Dangote the second best performer amongst its peers was recorded a -8% annual loss in stock value.

Across the conglomerates peer group, Transcorp blazed the trail with a gain of 14%. Unilever was hot on its heels with an appreciation of 11% over the year. UACN was down 18% and PZ also shed 13% over the course of the year.

Construction company, Roads Nigeria Plc was the stock market’s best performer in 2011 with a share price appreciation of 189%.

7up and Nestle were the Food and Beverages sub-sector’s best performers with annual gains of 19% and 21% respectively. Dangote Flour and Dangote Sugar both shed 71% over the course of the year. Cadbury shed 57% and Honeywell lost 54% of its stock price.

Hospitality company, Capital Hotel gained 105%, making it the stock market’s second best performed in 2011.

Goldlink Insurance led the sub-sector with a gain of 29%. GT Assur was down 7% over the year, NEM Insurance shed 8%, and Law union & Rock was down 12%.

The Oil & Gas sector was down an average of 28%. Mobil was the best performer down by only 5%, whilst Oando shed 67%, the worst performer.

The All Share Index closed at 20,730.63, down 16,31% from the onset of the year.

Whilst the stock market seems to be a no go area for most Nigerian retail investors, other savvy and opportunistic individuals that realize the tremendous profit potential the market holds will begin to take positions as early as possible in the new year.

The fact remains that prices are unsustainably low, these stocks now have nowhere to go but up. It appears it’s the foreign fund managers and the local institutional managers that will benefit from the upward correction in prices in 2012.

The average businessman with a little excess fund in his possession would do well to channel it into the market at this time. There are great fortunes to be made.