• Friday, March 29, 2024
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Investors gained N60bn in September amid bargain hunting, profit taking

Nigerian Stocks enter free-fall as banks fall by most in over 3yrs

Dearth of positive news which dampened investors’ appetite for shares of listed companies reflected in a paltry N60 billion gained by stock buyers in the month of September 2019.

The 21-day trading period in the review month saw continued cyclical performance in the equities market as stock buyers factored in risk-off sentiments in the global economy, as well as macroeconomic and structural issues in Nigeria.

As Nigeria marks 59th independence anniversary today, market watchers say Federal Government’s lethargic approach towards utilising the capital market remains the elephant in the room.

The Nigerian Stock Exchange (NSE) All Share Index (ASI) gained 0.38 percent which helped moderate record negative returns year-to-date (YtD) to -12.09 percent.

The NSE-ASI had opened the review month at 27,525.81 points but it stood higher at 27,630.56 points as at September 30, 2019. Also, the value of listed stocks moved up from September open level of N13.391 trillion to N13.450 trillion as at September 30.

The local bourse closed the last trading session in the third quarter (Q3) of 2019 in the red as sellers took profit on gains made in the preceding week. This happened despite the late rally seen on Monday, September 30, in the shares of Nestle Nigeria plc (3.71 percent), Total Nigeria plc (7.92 percent), CAP plc (9.89 percent), GTBank plc (5.80 percent) and Dangote Cement plc (0.53 percent).

With some largely capitalised companies seen recording significant capital appreciation lately, analysts expect portfolio rebalancing activity in early October to spur buying interest in the market.

Ahead of companies’ third-quarter financials expected to be released in few weeks’ time, research analysts at Lagos-based Vetiva are asking investors to buy stocks like GTBank plc, UBA plc, Access Bank plc, FCMB, Stanbic, Guinness, Seplat, Total, and Forte Oil.

They believe that these stocks are currently highly undervalued but have strong fundamentals, adding that their potential return in excess of or equal to 15 percent is expected to be realised between their current prices and the analysts’ target price (TP).

“The market is grossly undervalued across the board as investor apathy is deepened by the day. But this provides a buy signal as market fundamentals remain strong. Investors are still apprehensive of macroeconomic instability and inclement operating environment. This partly explained the prolonged downward trend on The Exchange,” said Sola Oni, CEO, Sofunix Investment and Communications.

“Aside from mega listing of MTN and a few others, there is abysmal dearth of new listing. Government is crowding out equity investors as monetary policy favours investment in fixed income,” Oni said.

Beyond the conventional capital market products of equities and bonds as well as manual regulatory processes, the players and regulators in the Nigerian capital market are introducing new and innovative processes and products, said Mary Uduk, acting director general, Securities and Exchange Commission (SEC).

Uduk said capital markets across the world have products and mechanisms to stimulate economic growth and development. Although many of such products are available in Nigeria, there are aspects that are still untapped, thereby limiting the realisation of the country’s potential.

Influenced by the capital market trends in the period ended December 31, transaction fees recorded by the NSE declined to N3.3 billion, a 13 percent drop against the preceding year. The NSE presented this at its annual general meeting on Monday. Oscar N. Onyema, chief executive officer of NSE, said the Exchange demonstrated resilience in the face of a challenging operating environment closing the year with surplus of N2.70 billion.

“Total revenue declined to 8 percent, that is, N7.67 billion, as investors sought towards more guaranteed investment asset classes in the face of uncertainty. Our listings revenue stream was the most impacted, as it fell by 21 percent to N1.4 billion,” he said.

 

Iheanyi Nwachukwu