Nigerian equities suffered a major contraction in April as investors lose N2.65tr


Nigerian equities suffered a major contraction in April as the bearishness at the stock market defied earnings reports and dividend recommendations. Quoted equities recorded net loss of N714 billion in April, increasing the net capital depreciation so far this year to N762 billion. With the decline in April, average decline in investors’ portfolio over the past 16 months now stand at 25.03 per cent, with net decline of N2.65 trillion in total market value of quoted equities.

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The All Share Index (ASI)- the main index that tracks share prices at the Nigerian Stock Exchange (NSE) closed April 2019 at 29,159.74 points as against its 2019’s opening index of 31,430.50 points, representing a four-month average return of -7.22 per cent.

Aggregate market value of all quoted equities at the NSE also dropped from the year’s opening value of N11.721 trillion to close April 2019 at N10.959 trillion, indicating net capital depreciation of N762 billion. The decline was exacerbated by widespread selloff in April with average decline of 6.06 per cent.

The ASI dropped from April’s opening index of 31,041.42 points to close the month at 29,159.74 points, representing average month-on-month decline of 6.06 per cent. Aggregate market value of all quoted equities also dropped from the month’s opening value of N11.672 trillion to close at N10.958 trillion. Fundamentally, the ASI and market value move simultaneously at the same value and in the same direction. However, addition and deduction of shares-through new listings and delisting, usually create temporary disparity between the two indices. When the impact of a new listing is fully absorbed by the market, the indices will converge and continue to trend on the same level.

With 57 decliners to 24 advancers, most sectoral indices closed negative during the month, despite subsisting dividend recommendations for the 2018 business year and the release of first quarter earnings reports by most quoted companies. The NSE Industrial Goods Index recorded average negative return of -7.36 per cent. The NSE Insurance Index dropped by 5.40 per cent. The NSE Consumer Goods Index posted a return of -5.38 per cent. The NSE Banking Index dipped by 4.48 per cent while the NSE Oil and Gas Index depreciated by 3.75 per cent during the month.

Chams Plc recorded the highest gain, in percentage terms, of 150 per cent to close April at 50 kobo per share. Dangote Flour Mills (DFM) Plc, which announced a major takeover offer during the period, rose by 84.31 per cent to close at N18.80 while Japaul Oil and Maritime Services appreciated by 65 per cent per cent to close at 33 kobo. On the downside, Associated Bus Company declined by 43.40 per cent to close at 30 kobo. Cement Company of Northern Nigeria (CCNN) followed with a loss of 29.65 per cent to close at N14 while Union Diagnostic & Clinical Services depreciated by 23.33 per cent to close at 23 kobo.

Nigerian equities had closed the first quarter with net capital depreciation of N49 billion, a sharp reversal from the bullish trading that saw equities with net capital gain of N1.38 trillion in first quarter of 2018. The performance in April further exacerbated the decline at the Nigerian equities market, which had suffered average decline of 17.81 per cent or about N1.89 trillion in 2018.

With the decline in April, average decline in investors’ portfolio over the past 16 months now stand at 25.03 per cent, with net decline of N2.65 trillion in total market value of quoted equities. Meanwhile, Nigerian equities had recorded net capital gain of N4.36 trillion or average gain of 42.30 per cent in 2017, implying considerable upside for investors despite the decline in the past 16 months.

The ASI opened 2018 at 38,243.19 points while aggregate market value of all quoted equities at the NSE opened 2018 at N13.609 trillion.

Further analysis showed that the market started the year with a loss in January, rallied to appreciable recovery in February and relapsed into negative again in March. Nigerian equities lost N326 billion in January 2019, with average decline of 1.82 per cent. The ASI and market value of equities had closed January 2019 at 30,557.20 and N11.395 trillion respectively.

In February 2019, investors in Nigerian equities netted N433 billion in capital gains as the stock market staged a major recovery. Average return for the month stood at 3.80 per cent. The ASI and market value of quoted equities had closed February higher at 31,718.70 points and N11.828 trillion respectively. The market rounded off the first quarter with a net loss of N156 billion and average decline of 2.135 per cent in March 2019.

Most analysts agreed that heightened political risk was a major factor that had adversely impacted the equities market since 2018. According to analysts, the impact of intense political activities, which had started earlier than expected, and the tenor of the often rancorous campaigns dampened investors’ enthusiasm. Global markets also contributed to the decline, especially improving yields in advanced economies. Foreign portfolio investors accounted for some half of transactions in the Nigerian market. Most analysts however believe that the equities will close positive this year.

Chief Dealer, Globalview Capital Limited, Mr. Aruna Kebira, told The Nation that the political tension remains a major moderator for the market despite the conduct of the March 2019 general elections. The Independent National Electoral Commission (INEC) had declared incumbent President Muhammadu Buhari of the All Progressives Congress (APC) as the winner of the presidential election, but the main opposition candidate, Alhaji Atiku Abubakar of the Peoples Democratic Party (PDP) is contesting the results of the election at the election tribunal.

Vice Chairman and Chief Executive Officer, Capital Assets Limited, Mr. Ariyo Olushekun noted that the fundamentals of most quoted companies suggest positive outlook for the market citing attractive earnings yields, price to book ratios and dividend yields that show that Nigerian equities are undervalued and have considerable upside potential.

“This year you can expect to see a rebound. Last year was a flight to safety, but this year, after the elections, you will see a steady recovery. I see political stability and the continuation of the economic programmes of the government, most of which should underpin long-term development of the economy,” Olushekun said.

He also advised investors to invest in companies with sound fundamentals and to seek the advice of their stockbrokers to determine the most appropriate timing to enter into the stocks.

Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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