Stocks lose N418bn in first quarter 2017

… Consumer goods sector emerges worst performing sector Q1

Stocks listed on the Nigerian Stock Exchange (NSE) have received a beating from investors in the first quarter (Q1) of 2017, with the value of listed equities declining by N418 billion within the period.

The Consumer Goods Index, one of the 11 sectoral indexes on the NSE, was the worst performing index in the first quarter (Q1), the analysis of Q1 2017 market performance by BusinessDay Research and Intelligence Unit (BRIU) has shown.

It closed at -12.9 percent, far worse than the overall market Index, the NSE ASI, which ended the quarter at -5.19 percent. The decline in market capitalisation of equities that are components of the consumer goods index amounted to a loss of N296 billion in market capitalisation for that sector.

Nine sectoral indexes ended Q1 2017 in the negative territory, with the consumer goods index leading with decline of-12.9 percent, NSE Lotus Islamic Index, -7.6 percent and NSE Oil and Gas Index, -6.7 percent, making the top three worst performing sectors.

Only two indexes closed northward, and they are the NSE Industrial index and the NSE ASeM Index, which appreciated marginally by 0.1 percent and 0.44 percent respectively.

In particular, Beta Glass, which is a component of the industrial index, appreciated by 46.04 percent to emerge the quarter’s best performing stock on the NSE. Airline Services and Logistics (ASL), 42.40 percent; UBA, 28.22 percent; Okomu Oil, 24.47 percent and Stanbic IBTC, 18.53 percent, topped the table of the stocks that made the highest gains during the quarter.

Kemi Akinde, senior research analyst at Meristem Securities, attributed the huge decline in stock prices of equities which are the components of the consumer goods index, to unimpressive quarterly results and realignment of portfolios, as investors poise to take advantage in dividend payment as companies announce their 2016 audited results.

“The quarterly results of some of the companies listed under the consumer goods index are not impressive, meaning that investors in those stocks who want dividend may not get such in the current dividend season. So, they are moving from some of these stocks to those that are likely to pay dividend, which was what caused the decline noticeable in the consumer goods index”, she said. “The foreign exchange issue is another factor” she added.

On his part, Tajudeen Ibrahim, head of research at Chapel Hill Denham, cited spending cuts being embarked upon by Nigerians as a measure to minimise the impact of the recession, as the reason for the woeful performance of the consumer goods index.

“The woeful performance can be attributed to weak consumer spending power, higher inflation and the devaluation of the naira,” Ibrahim said. ‎

Further analysis shows that despite the impressive results announced so far, by some banks in the country, the banking index still closed slightly lower at -0.03 percent at the end of the first quarter. On what was responsible for this development, our analysts expressed divergent views.

“The performance of banks in 2016 was uneven, so only banks that outperformed will be rewarded by investors. Some banks have dampened market expectations by postponing the date of announcement of their 2016 audited results. Such postponements weaken investors’ willingness to be substantially overweight in banks and the stock market as a whole”, Ibrahim said. ‎

“The impressive results announced by banks increased orders for banking stocks. Consequently, brokers had various mandates to sell. At the end of the day, the price impact was much,” Akinde said.

Going into the second quarter of 2017, Ibrahim suggested a realignment of portfolios, especially with regards to consumer goods stocks. “Portfolio managers should buy consumer stocks that can pass cost pressures to the consumers of their products. Sugar producers look compelling in this regard.”

“The performance of the market in the second quarter will be driven by economic indicators, particularly Q1-17 GDP and inflation rate through May, and the FX policy of the CBN. If these factors are positive, they should strengthen investors’ confidence in the market. In addition, an alignment of monetary and fiscal policies, if achieved in the second quarter, should guide into the coming quarters with respect to economic recovery and growth,” Ibrahim said.