Sell Pressure on Bellwether Stocks Depresses Market to Four-Month Low

It was another bearish week at the Nigerian equities market as investors continued with their sell off positions in bellwethers, pushing the Nigerian Stock Exchange (NSE) All-Share Index to a four-month low. Specifically, the NSE ASI fell below the 40,000 mark to close at 39,323.62, translating to a decline of 2.8 per cent last week alone. Month-to-date, the benchmark index has declined by 3.7 per cent, while the year-to-date (YTD) growth contracted to 2.8 per cent. Similarly, the market capitalisation shed N416.1 billion last week to close at N14.2 trillion. The negative performance recorded last week was partially caused by the dumping of shares of bellwethers-Dangote Cement Plc, Nigerian Breweries Plc, GTBank Plc and Zenith Bank Plc. According to analysts at Afrinvest (W.A), the current bearish run in the local bourse is largely due to foreign investors selling off positions in emerging and frontier markets, leaving local investors skeptical of potential near term upsides. “However, we believe cheaper valuation presents investors with an attractive entry opportunity to take advantage of,” they said.

In their own assessment, analysts at Cordros Capital said the persisting sell-offs and continued sessions of sideways trading suggest a need for cautious trading by investors.

“However, still-strengthening macroeconomic fundamentals remain supportive of potential gains for patient funds,” they noted.

Daily Performance The domestic bourse opened the trading week on a negative note as the bears consolidated their hold. The index fell 0.12 per cent following sell offs in Tier 1 banking stocks – Guaranty Trust Bank Plc (GTBank) and Access Bank and FBN Holdings. In terms of market capitalisation the NSE investors shed N17.2 billion to close at N14.6 trillion. As result, the NSE ASI YTD return declined to 5.7 per cent.

The volume of trading level weakened as volume and value traded dipped 22.6 per cent and 54.6 per cent to 271.2 million shares and N2.3 billion respectively. The top traded stocks by volume were African Alliance Insurance Plc (90.0 million shares), Fidelity Bank (21.9 million shares) and Diamond Bank (20.5 million shares) while GTBank (N664.9 million), Zenith Bank (N282.8 million) and Nestle (267.0 million) were the top traded stocks by value. Sectorally, three of five indices tracked trended northwards. The NSE Oil & Gas Index advanced the most, appreciating 0.5 per cent. The NSE Industrial Goods Index appreciated by 0.3 per cent, while the NSE Consumer Goods gained 0.1 per cent. Conversely, the NSE Insurance Index topped losers chart, shedding 0.9 per cent, while the NSE Banking Index fell 0.2 per cent. On the second day, the market maintained their dominance of the market the market as 34 stocks depreciated led by Eterna Plc with 8.5 per cent. Honeywell Flour Mills Plc and The Initiates Plc trailed with 5.0 per cent each. LASACO Assurance Plc went down by 4.8 per cent, while African Alliance Assurance plc shed 4.7 per cent. The persistent bear run pushed the NSE All-Share Index further down by 0.43 per cent to close at 40.249.29, while market capitalisation closed lower at N14.58 trillion. Investors traded 281.260 million shares worth N4.092 billion in 4,304 deals.

The market fell further on the third day of the week, reducing the YTD to 4.9 per cent.

The YTD return is the lowest in more than three months. The negative performance was mostly caused by profit taking in the shares of Ecobank Transnational Incorporated, Nigerian Breweries Plc and Dangote Sugar Refinery.

Analysts at Meristem Securities Limited said: “The market closed underwater for the third consecutive day this week. This is reflective of the bearish sentiment towards top counters in the market, especially in the consumer goods and banking space.”

In all, 28 stocks depreciated, while 15 others appreciated in prices. UAC of Nigeria Plc led the price losers with 8.5 per cent to close at N14.50. The conglomerate has suffered N89.178 billion, down by eight per cent from N82.572 billion.

Operating profit fell by 19 per cent to N7.031 billion, from N8.639 billion. However, net finance cost soared by 218 per cent from N1.361 billion to N4.324 billion in 2017. As a significant sell-off following the company’s poor results for 2017 financial year.

The high finance cost recorded by the results, profit after tax fell by 83 per cent to N962 million in 2017 compared with N5.666 billion in 2016. Meanwhile, Chams Plc closed as the second highest price loser with 5.0 per cent, followed by C & I Leasing Plc and Unity Bank Plc with 4.9 per cent apiece. UAC company depressed its profit after tax by 83 per cent for the year ended December 2017.

Specifically, UACN posted a revenue of Property Development Company Plc shed 4.8 per cent. On the positive side, Ikeja Hotels Plc maintained the number spot, gaining 9.8 per cent to close at N2.24. The stock had similarly led the price gainers as investors continued to react positively to the lifting of the suspension placed on the stock in November 2016.

MRS Oil Nigeria Plc chalked up 4.8 per cent, while First Aluminium Nigeria Plc garnered 4.5 per cent. Niger Insurance Plc and John Holt Plc appreciated by 4.3 per cent and 3.8 per cent in that order. Trading activity level was mixed as volume traded fell 4.8 per cent to 266.7 million shares while value traded rose 14.3 per cent to N4.7 billion.

The market depreciated by 1.06 per cent to close below the 40,000 benchmark on Thursday with the NSE Index fell to 39,723.85, while market capitalisation closed lower at N14.39 trillion.

Decline in the share prices of Diamond Bank, Fidelity Bank, Dangote Sugar, Nigerian Breweries and FBN Holdings were mainly responsible for the negative close on Thursday. Similarly, the market went further down on Friday by 1.01 per cent to close the week lower. The depreciation recorded in the share prices of Diamond Bank, Fidelity Bank, Transcorp, UBA and FBN Holdings depressed the market.

Market Turnover An analysis of the trading activity in the review week showed a turnover of 1.372 billion shares worth N16.022 billion in 21,099 deals, down from 1.457 billion shares valued at N23.666 billion that exchanged hands in 19,674 deals the previous week.

But the Financial Services Industry remained the most traded, recording 1.010 billion shares valued at N8.670 billion traded in 12,049 deals, thus contributing 73.6 per cent and 54.11 per cent to the total equity turnover volume and value respectively. The Services Industry followed with 107.246 million shares worth N229.715 million in 712 deals. The third place was occupied by Consumer Goods Industry with a turnover of 71.946 million shares worth N5.506 billion in 3,818 deals.

Trading in the top three equities namely –Zenith Bank Plc, African Alliance Insurance Company Plc and Ikeja Hotel Plc accounted for 276.876 million shares worth N2.939 billion in 2,112 deals. Also traded during the week were a total of 70 units of Exchange Traded Products (ETPs) valued at N1,943.00 executed in seven deals, compared with a total of 153,246 units valued at N4.009 million that was transacted the previous week in 22 deals.

Similarly, a total of 10,754 units of Federal Government valued at N11.412 million were traded in five deals, compared with a total of 7,508 units valued at N7.506 million transacted two weeks ago week in 12 deals.

Price Gainers and Losers Meanwhile, a total of 61 stocks depreciated last week higher than 54 equities of the previous week, while only 14 stocks appreciated, compared with 20 stocks of the previous week.

Eterna Plc led the price losers with 22.2 per cent, trailed by Japaul Oil & Gas Plc with 20 per cent. Dangote Flour Mills Plc shed 16.8 per cent, just as Transnational Corporation of Nigeria Plc went down by 16.3 per cent. AIICO Insurance Plc and Equity Assurance Plc declined by 16.1 per cent and 16 per cent in that order. Other top price losers included: Flour Mills of Nigeria Plc (15.5 per cent); FCMB Group Plc(15.3 per cent); Dangote Sugar Refinery Plc and FBN Holdings Plc (12.2 per cent each).

On the positive side, the Ikeja Hotel Plc led the price 44.9 per cent, trailed by MRS Oil Nigeria Plc with a growth of 21.2 per cent. Law Union and Rock Insurance Plc garnered 20.9 per cent, just as Niger Insurance Plc and Consolidated Hallmark Insurance Plc chalked up 11.1 per cent.

Other top price gainers were: Okomu Oil Palm Plc (8.4 per cent); John Holt Plc (7.6 per cent); Royal Exchange Plc (6.2 per cent); Mutual Benefits Assurance Plc (6.0 per cent); and Forte Oil Plc (5.0 per cent).