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Stock exchange lost N780bn in turbulent Q1

By on April 23, 2014

The Nigerian Stock Exchange’s Banking Index fell by 16 per cent in the first quarter of this year, more than any other sectoral indices, in what some analysts say is the worst performance by the Exchange in years.

Despite a positive outlook at the beginning of the year, quantitative easing tapering by the United States, monetary tightening by the Central Bank of Nigeria and other developments limited the performance of the Exchange.

By the end of the first quarter on March 31, the market capitalisation of the listed equities at N12.446tn was down by N780bn or 5.9 per cent, while the NSE All-Share Index’s year-to-date return stood at -6.25 per cent.

The NSE Oil and Gas Index put in a performance that was almost as bad as the Banking Index, with a decline of 15.20 per cent.

The NSE Consumer Goods Index and Insurance Index were down by 12.11 per cent and 11.28 per cent, respectively; while the Lotus Islamic Index and the Alternative Securities Market Index fell by 3.59 per cent and 1.03 per cent in that order.

Only the Industrial Index appreciated in the quarter; it rose by 1.59 per cent.

The Chief Executive Officer, Enterprise Stockbrokers Plc, Mr. Rotimi Fakayejo, said, “This has been the worst first quarter the market has witnessed in a long time. The closest we got to the present situation was in 2008 and 2009 when there was serious market meltdown, and those were unusual times.”

According to Fakayejo, the first quarter is usually a period when there are a lot of expectations concerning the annual audited reports of listed companies and corporate actions.

“But this year, even as good as the audited results were, the extent of the heat that came upon the market was much,” he said.

He cited the increase in the Cash Reserve Requirement on public sector funds in the custody of banks and the suspension of the Central Bank of Nigeria’s Governor, Mallam Lamido Sanusi, as some of the factors that negatively affected the banking sector.

Fakayejo said, “Without a doubt, the NSE Banking Index was the worst hit (in the first quarter) and the reason for that is because it is the most liquid sector. So, if anybody is going to give up shares, it is in that sector.

“It is also the sector that has the highest number of shares in issue and it is the sector that is easily affected by the CBN’s monetary policies.”

The Chief Executive Officer, Lambert Trust and Investment Limited, Mr. David Adonri, explained that the NSE Industrial Index appreciated in the quarter because it did not have any negative factor affecting investor confidence as Dangote Cement Plc and the other cement firms, especially Lafarge Cement WAPCO Plc, continued to appreciate.

He said the performance of Oando Plc was a major factor in the performance of the Oil and Gas Index.

“Oando initially appreciated, but it later took a nosedive, which dragged that sector down,” Adonri said.

Asked by Reuters last week if the stock market was losing steam, the Chief Executive Officer, NSE, Mr. Oscar Onyema, said the market was only reacting to global economic realities.

The NSE boss, who stated that the market was more efficient today than it was previously, added, “I think a little pull back is not necessarily a bad thing in the context that last year, you had a 47 per cent return and the year before that, you had 35 per cent return.”

Operators are now looking to the first quarter earnings results and improvements in markets globally to boost the Nigerian market in the second quarter.

“The market has already reacted to all the negative developments and corporate disclosures have started hitting the market – a lot of them quite impressive. So, it is correct what analysts are speculating that the market will be comfortable in the second quarter,” Adonri said.

 

 

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