• Friday, March 29, 2024
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BusinessDay

Stock market activity declines by more than 50 percent year-on-year in Q1 2019

Stock market

Stock market turnover for the first quarter of 2019 fell by around 52 percent in volume and value as the elections which held in the middle of the first quarter weighed heavily on stock market performance. Based on data compiled from the Nigerian Stock Exchange (NSE), the total volume of trades in Q1 fell from about 87.6 billion trades to 41.4 billion trades, representing a decline of around 52.7 percent while the total value of trades fell from N879.5 billion to N417.7 billion, representing a drop of around 52.5 percent.

“I think most analysts expected stock market activities to drop significantly in the first quarter due to the general elections,” said Jeremiah Ejemeyovwi, Lectuer in Economics at Covenant University. “Typically, investors tend to be risk averse during periods of high uncertainty such as an election period and will rather sit on the sidelines that invest their funds when they are not sure the elections will be safe”.

“I think if we look deeper into the data, we will see that drop was largely associated to less activity by foreign investors who chose to completely avoid investing in Nigeria during the recently concluded elections. I think investors will return to the market in the second quarter of the year. I don’t see this poor performance continuing.”

A decline in total value of trades in Q1 by around N461.7 billion underscores the pessimism of investors in the Nigerian equity market. Analysts expect that the decline in activity will be a serious blow to the quarterly performance of stock brokerage firms who would have seen commissions decline precipitously due to the drop-in value of shares traded in the quarter.

A review of the Top 10 Brokers Performance published by the NSE showed that the top 10 brokers were responsible for up to 69.4 percent of the value of shares traded in Q1 2019, a 5-percentage point increase from the 63 percent mark they achieved in Q1 2018. Also, the volume of their trades accounted for 57 percent of the total market volume, a significant increase from the 49.3 percent mark reported in Q1 2018.

“This shows that there is more consolidation of market share for the top brokers. As smaller brokerage firms exit the market, the bigger firms absorb the clients previously serviced by the small brokers. Also, most high net worth investors are putting all their funds with the top brokers, leaving the smaller brokers with very little funds to play with it in the market,” said a Lagos based stockbroker.

Stanbic IBTC Brokers increased their market share by value traded from 14.59 percent in Q1 2018 to 17.81 percent in Q1 2019 to maintain top spot as the number one brokers in the market. They were followed by Rencap Securities which increased its market share from 9.47 percent to 13 percent. The top 2 brokers control about 31 percent of the brokerage market.

 

IFEANYI JOHN