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Foreign exposure drives 3 brokers to top NSE list in 2019

Expert tips financial, health, telecoms as sectors to watch on NSE in 2020

Stanbic IBTC Stockbrokers Limited, Rencap Securities (NIG) Limited, and CSL Stockbrokers Limited topped the Nigerian Stock Exchange (NSE) list of best stock-brokers by their value of transactions for the week ended June 7, 2019.

Checks by BusinessDay revealed that the three brokers, driven by their exposure to foreign investors, outperformed the other 126 registered brokers on the Lagos bourse to report trade value of 49.29 percent.

“These brokers help foreign investors, mostly institutional investors, to buy stocks on the Nigeria market and this helps to boost their value of transactions,” a Nigerian analyst based in the US told BusinessDay on the condition of anonymity.

Ayorinde Akinloye, equity research analyst at CSL Stockbrokers, said “foreign investors mainly buy the premium stocks which have high prices; for example, foreign investors will not but Tier-2 banks except Stanbic”.

According to NSE data analysed by BusinessDay, out of the total value of trade at N20.46 billion reported by the NSE top 10 brokers between June 3 and 7, 2019, Stanbic, Rencap and CSL stock-brokers recorded a share of N12.4 billion, leaving the remaining N8.6 billion for the rest brokers to struggle for.

A brokerage company buys and sells orders submitted by investors. Its main duty is to act as a middleman that connects buyers and sellers to facilitate a transaction. Brokerage companies typically receive compensation by means of commission (either a flat fee or a percentage of the amount of the transaction) once the transaction has successfully completed.

Other stock-brokers that made the list of the NSE top 10 by the value of transaction in the review period included Cordros Securities Limited, EFG Hermes NIG Limited, Cardinalstone Securities Limited, Coronation Securities Limited, Chapel Hill Denham Securities LTD, FBN Quest Securities Limited, and EFCP Limited.

The brokers made the NSE list with shares of 11.9 percent, 8.80 percent, 3.27 percent, 2.59 percent, 2.56 percent, 2.01 percent and 1.69 percent, respectively, of the total N20.46 billion reported by the top 10.

“It is the intrinsic company shares that they traded. For example, if a stock-broker traded 1 million units of Dangote at N190 per share, the value will be higher compared to another that has done 20 million units of, say, Lasaco Insurance. So it depends on the shares that they traded,” Henry Ogbuaku, asset manager, Growth and Development Asset Mgt Ltd, said.

A further analysis of the data from the NSE revealed that six of the brokers on the top 10 list by the value of transactions reported also made the list of the top 10 brokers by volume.  Other brokers that made up the list of top 10 by volume of transactions were Magnartis Finance and Investment Limited, Capital Trust Brokers Limited, Morgan Capital Securities Limited, and Readings Investments Limited.

On the other hand, three brokers made the list of the top 10 by value of transactions but were not on the list of the top 10 by volume of transactions. They included Cordros Securities Limited, Coronation Securities Limited, and EFCP Limited.

“The guys that top by volume and are not in the top by value evidently are more retail-focused. Given the characteristics of domestic investors, they tend to buy lots of lower priced stocks compared to highly priced ones,” Akinloye said.

Endurance Okafor