Nigerian Capital Market in the year 2011 experienced barrage of unprofitable transactions as market plunged considerably by -17.42% while the dearth of active and sustainable bargain tendency observed in the year showcased the unfeasibility of full market recovery without healthy market fundamentals, robust market confidence, strong investors’ loyalty and key supports from Government.
The general believeis that investors are tendingto punish stocks/market severely. If such market is found to be overvalued or lack of investors’ protection as they had expected- the degree of this punishment does not only gauge but reflects the confidence level of investors towards such market and the economy at large. A vote of confidence from Government is much likely to rekindle this.
Nevertheless, our broad analysis of the trend revealed that the Nigerian capital market is still facing the punishment of the bubble that occurred in the year 2007 as investors failed to respond positively to all measures taken by the Regulators to stage a sustainable market recovery- a true reflection of loss of investors’ confidence towards investment in equities and this in our opinion will continue to be the status in the absence of vote of confidence from Government.
In addition, the number of self-delisting companies from the market in the year buttressed our position on lack of confidence as one of the major factors driving continued pessimistic posture of investors. The total value of self-delisting companies in the year amounted to N54.74 billionrepresenting 0.83% against the current market net worth.
The market outlook in the last four years i.e. 2008 to 2011 reveals a drawn out market posture as investors continued to sell out from market unabatedly. The gains of +18.87%recorded in the year 2010 has been depleted by -17.42% loss experienced in 2011.
In the early stage, market experienced impressive rally in the month of January to open the year 2011 with 6.88% gain. The buying of toxic assets in the banking subsector coupled with the premiums placed on troubled assets by AMCON and improved Regulatory environment observed contributed,'January effect', as market rallied considerably in the first month of the year.
Although, the quarter closed with the bears as the rally lost its momentum to speculative tendency with high propensity for short term profit displayed by investors in the month of February and March - an indication of weak market confidence.
More so, the unsettled economic atmosphere caused by high political uncertainty in the country coupled with increase in MPR contributed to the unfavourable speculative tendency observed in the quarter.
In addition, the proposed merger and acquisition discussion witnessed in the banking subsector raised some dust as private equity companies expressed their desire to acquire rescued banks. This was perceived to have contributed to market turbulence and volatility witnessed in Q1, 2011 as the sector remained the market leader in terms of activities while the long delay in banking earnings report and the unfavourable Monetary Policy also had negative impact on market sentiments as noted in Q1 2011 NCM report.
Furthermore, TRANSCORP, ZENITHBANK, FIRSTBANK, FIRSTINLND and UBA drove the market volume turnover in the quarter while TRANSCORP, CHAMPION, SPRINGBANK, BERGER and BAGCO were the top gainers in that order as Transcorp led the pack with 122%appreciation. The improved institutional buying witnessed in Q1 contributed to the impressive market turnover observed during the period.
Similarly, the market sentiments stayed bearish in the half-year as NSE ASI YTD remained in red zone by -0.49% despite+0.92%gain recorded in Q2, riding on the back of cautious bargain driven by violence-free election as political tension waned considerably.
Although, the 90days deadline given to the ailing banks to recapitalise or face liquidation by September 30th 2011 contributed to the underwhelming performance observed in the quarter as market experienced increased volatility while YTD closed red.
The underwhelming performance noted above was buttressed with low market turnover witnessed in Q2 as volume and value traded within the period dipped by-5.00%and-25.74%respectively as less institutional activities were observed.
Meanwhile, an extended analysis revealed an unimpressive performance when compared with the outlook recorded in Q2 2010 which closed with 3.48%and 27.73% of volume and value turnover respectively.
In addition, ASOSAVINGS, ZENITHBANK, TRANSCORP, FIRSTBANK and UBA Plc were the toast of investors in Q2 2011 while TRANSCORP, CHAMPION, NEIMETH, AIRSERVICE and FLOURMILL were the top performers in terms of price appreciation in the quarter as Transcorp Plc sustained the leading position on the gainers' chart by 106.00% appreciation.
Quarter three recorded more depressed posture as market turnover and value traded collapsed further by -33.79% and -24.20% respectively due to the huge sell-off and cash-out witnessed in the quarter as market capitulated considerably, losing N1.39trillion with YTD market performance standing at -18.84% while the quarter alone recorded-17.51% loss.
The fear of second global recession could have triggered the huge sell-off and cash out trend observed while the erratic bombings by BOKO-HARAM, which have heightened insecurity of business environments, stoked the continuous sell out as the inactive posture of the foreign investors could not be isolated from these factors as well.
More so, the hasty nationalisation of three rescued banks (BankPHB, Afribank and Spring Bank) in the quarter contributed majorly to the investor apathy and ‘wait and watch’ attitude that dominated the quarter.
During the period, blue chip stocks particularly the banking stocks experienced more volatility and less patronage as retail investors developed cold-feet towards investments in equity. As a result, the All Share Index hits below the 21months low as the quarter recorded the worst performance in the year with -17.51% losses.
However, ZENITHBANK, GUARANTY, ACCESS, UBA and FIRSTBANK were the most active stocks in the subsector. Meanwhile, CAPHOTEL, IKEJAHOTEL, UNTL, ROADS and OKOMUOIL were the top gainers in the quarter in that order as CAP HOTEL led the chart with 114.29%gain.
The last quarter experienced the extended negative trend as sell tendency still continued to dominate the period. Although, the quarter experienced a break of+1.72%gains in the opening month of the quarter, after four months of uninterrupted downtrend.
The gain was later erased as downtrend resumed in style with increased volatility, dipping market by -4.00% in the month of November due to lack of positive news and sustained attractive rates in the alternative investment markets which continued to lure funds out of the bourse while extending the unprofitable trend to the month of December with unrelenting sell tendency.
Although, the end of the year syndrome had overwhelming impact while the pressure to meet the festive demand and needs increased the sell mandates in the market considerably.
However, the attractive low prices across the board stoked the impressive value investing witnessed in the last nine sessions of the year as market experienced consistent Santa Claus rally while investors presumed to have taken strategic positions against the January effect.
This pushed the benchmark indices up with +3.82% gain recorded in the month as against -4.00% loss recorded in the previous month while the YTD performance retraced from-20.31% loss to close at-17.42% loss for the year.
The volume and value turnover for Q4 closed with impressive performance as it moved out of the red zone by 43.95% and 16.64% respectively when compared with previous month posture. Although, this could not salvage the negative posture for the year due to dominance of investment apathy witnessed in the year as the year on year volume and value turnover dipped by -2.73% and -20.90% respectively.
Nevertheless, the wary posture of the investors and the low turnover witnessed could not be isolated from the unbalanced Monetary Policy which has affected market severely.
The attractive rates in the debt market have lured funds out of the equity market continuously as investors seek safe haven for their hard earned money due to growing volatility in the year. The market outlook in the year revealed a depressed posture as market lack will to drive sustainable profitable transactions.
In the last quarter, GTASSURE, UBA, FIRSTBANK, ZENITHBANK and GUARANTY closed as top active stocks while the following blue chips i.e. FIRSTBANK, GUARANTY, ZENITHBANK, UBA and OANDO closed as most liquid stocks in the last quarter of the year.
Overall, TRANSCORP, ZENITHBANK, GTASSURE, FIRSTBANK, and UBA topped the activity list as most active stocks while among the active stocks FIRSTBANK, GUARANTY, ZENITHBANK, UBA and ACCESS were the most liquid. This, however, revealed that the banking subsector remained most active and liquid on the Nigerian bourse as the stocks of the subsector dominated the charts.
On a final note, market experienced certain numbers of improvements and developments in the year. The banking subsector closed with lesser number of banks as a result of successful merger and acquisition that took place in the sector within the year.
Market closed with 15 stronger and healthy banks as against 21 banks that started the year while their books have been cleared of nonperforming loans by AMCON. To this regard, we expect improved lending in the economy in the coming periods as the banks are healthy to recommence active lending on a clean slate.
The developments and new initiatives in the market during the year were perceived as the right steps in the right direction. The new market segments have aligned our market with International Standard and global best practice which will make it more accessible and easy to evaluate not in isolation anymore but along with its counterpart.
In addition, the new market segmentation is likely to usher in more companies on the bourse particularly in the power sector of the economy as the utility sector is yet to be active while the introduction and listing of first ETF on the bourse is commendable as one of the initiatives in the pipeline to deepen the market
A number of developments we believed should have impact in the year as predicted in the previous reports. Some of which are:
Developments in the coming year:
·Improved lending to real sector as competition in the banking sector will drive this.
·Introduction of securities lending and borrowing in the market
·Demutualization of Exchange will gain more popularity
·Positive response to debt leniency to brokers and dealers
·Listings campaign of telecom and multinationals firms will gain dominance
·Increased activities in the bond market as government appeared broke
·Dematerialization of shares
·Inflation and Monetary Policy rates
·Liquidity challenges as priorities will compete for cash
·Improved regulatory oversight
·Continued cleanup of market irregularities by NSE
·continued effort towards infrastructure development
·Sustained support towards real and agricultural growth
·Change in Monetary Policy Rates
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