Large-cap stocks fail to bail reeling market

Increased liquidity inflow into Nigerian equities, particularly in favour of bellwether stocks, failed to secure the stock market from stumbling, BusinessDay investigation has shown.

The recent bearish mood in the market had been attributed by many analysts to unimpressive H1 results which, they said, sparked sell-off by investors, along with the share price decline in bellwether stocks.

Market analysts, though, did not rule out the possibility of speculators latching on to the recent priced-down stocks to increase their holdings in some counters for future gain.

BusinessDay trend watch in the past seven months shows that money flows into large-cap stocks failed to save the market, as majority of these stocks’ values hemorrhaged.

Looking at the performance of large-cap stock, Access Bank plc, which opened the year (January 2, 2014) at N9.55, closed the seven-month period to July 31, 2014 at N9.8.

Also in the same period, Ashaka Cement plc rose from N21.88 to N30.50; Cadbury Nigeria plc appreciated from N58.61 to N74.25; Dangote Cement plc rose from N220 to N233.94; Dangote Sugar Refinery plc declined from a high of N11.30 to N9.20; Diamond Bank plc dropped from N7.5 to N6.70; while Ecobank Transnational Incorporated plc increased slightly from N16.39 to N16.70.
In addition, the share price of FBN Holdings plc dropped from N16.30 to N15; FCMB Group plc rose from N3.84 to N4.29; while that of Fidelity Bank plc dropped from N2.70 to N2. Flour Mills Nigeria plc declined from N87 to N73.98; Forte Oil plc rose from N92.87 to N211; GlaxoSmithKline Consumer Nigeria plc dropped from N68 to N66.10; while Guaranty Trust Bank plc rose from N27.75 to N30.

Performance of equities at the Nigerian bourse has recently been blotted as more stocks were placed on dealers’ sell list. In line with equity holders increasing sell orders, the supply side of Nigeria equities, particularly last month, increased remarkably and impacted negatively on their prices.

Furthermore, Guinness Nigeria plc declined from N235.09 to N197.3; International Breweries plc declined from N28.70 to N28.05; Julius Berger Nigeria plc dipped from N72.29 to N63; Lafarge WAPCO plc rose from N115 to N120; while also in the seven-month period, Nestle Nigeria plc declined from a high of N1,182 to N1,121.

“Putting my outlook on H1’14 earnings scorecards (some of which have been released) and the quarters ahead in perspective, I believe the large-caps (which are bellwethers on the NSE) are largely fairly valued, thus having narrow headroom for capital appreciation,” said Rasaq Abiola, analyst at Associated Discount House Limited.

“The large-cap consumer goods firms have seen modest pressure on volumes due to distribution challenges and pressured consumer wallets, thus having less investment attraction for investors at current valuation,” Abiola said.