June 29, 2012/PROSHARE RESEARCH
 

Sectoral Indices are available in stock markets globally as they are specialised indices that help in tracking the performance of specific sectors of the market. Companies that make up such indices are categorised based on certain criteria and this categorisation guarantees a professional and accurate classification of companies in their respective business environments.

The Nigerian Stock Exchange has a broad Index known as All-Share Index (ASI) which measures the general stock market performance while it also has five Sectoral Indices that are used to gauge the sectoral performance and efficiency of the stock market. They are NSE 30, NSE Banking, NSE Consumer Goods (Formerly Foods & Beverages), NSE Insurance and NSE Oil & Gas.

The NSE 30 Index comprises and measures the performance of Blue Chips stocks listed on the Nigerian bourse. At intervals, NSE normally review the set of stocks that made up the Index based on the current market performance and as such replace any stock found under-performing based on set parameter with any new one that fits in.

In 2011, out of the 30 Blue Chips stocks on the Index, seven (7) closed the year with positive figure while the remaining twenty-three (23) closed negative. Top gainers on the 2011 list are CHAMPION, GUINNESS, NB, NESTLE and TRANSCORP while the top losers are DIAMONDBNK, UBA, DANGSUGAR, OANDO and ASHAKACEM. The NSE 30 Index recorded -16.06% losses in 2011 as ASI also recorded -17.42% losses in the same period.

The 2012 YTD performance review of the index reveals that fifteen (15) stocks currently trades in the green zone while the remaining fifteen (15) stocks trades otherwise. Top gainers for 2012 include TRANSCORP, UBA and ACCESS while the top losers are OANDO, FCMB and ASHAKACEM. The NSE 30 Index records +5.02% YTD gains in 2012 as ASI also records +4.06% YTD gains in the same period. 

A graphical comparison of NSE 30 and ASI between 2011 and 20^th June 2012 reveals that the two indices were moving simultaneously till early January 2012 while NSE 30 trades slightly above ASI from January till date and it simply implies that NSE 30 stocks do have a great impact on the direction the ASI will take on each trading days.

NSE Index Committee members do meet on a quarterly basis to review and rebalance the NSE Indices. At the end of their deliberations, members will agree to review the NSE Index. The NSE 30 Index was reviewed and rebalanced three times in 2011 and twice in 2012 so far.

The NSE Banking Index comprises of top ten (10) performing banks listed on the bourse and as measures the market performance of the subsector on the NSE. 2011 review revealed all the banks closed negative in the year with DIAMONDBNK, UBA and SKYEBANK taking the lead while an improvement has been so far witnessed with six of those banks trading in the green zone. Banks like UBA, ACCESS and FIRSTBANK top the list of the positive traders.

The NSE Banking Index recorded -33.47% losses in 2011 as ASI also recorded -17.42% losses in the same period while the Index records +12.23% YTD gains in 2012 as ASI also records +4.06% YTD gains in the same period.

A graphical comparison of NSE Banking and ASI reveals that the two indices moved concurrently from January to June 2011 while NSE Banking trades below the ASI from June 2011 till date. The NSE Banking Index also affects the direction of the ASI.

NSE Consumer Goods Index (formerly Food & Beverages) which consists of top ten (10) stocks from the sector closed the year 2011 with five (5) gainers to five (5) losers. Stocks of GUINNESS, NB and NESTLE tops the gainers’ while DANGFLOUR, DANGSUGAR and CADBURY top losers

The YTD performance in 2012 went down compared to the previous year with four (4) stocks making the gainers’ list while six (6) make losers. Top gainers on the list are CADBURY, NB and NESTLE while the losers’ are DANGSUGAR, FLOURMILL and PZ.

The NSE Consumer Goods Index recorded -24.79% losses in 2011 as ASI also recorded -17.42% losses in the same period while the Index records +1.17% YTD gains in 2012 as ASI also records +4.06% YTD gains in the same period.

The NSE ASI trades slightly above the NSE Consumer Goods Index in early 2011 while the NSE Consumer Goods Index moved ahead of the ASI in March 2011 till November as ASI later trades above the sector.

The Consumer Goods sector Index was only reviewed in 2011 with stocks like the now delisted NBC, NASCON, HONEYWELL, FLOURMILL and NNFM moving out while stocks like NB, PZ and UNILEVER came in.

The NSE Insurance Index also contains ten (10) top insurance stocks which are used to measure the general performance of the insurance subsector. The Index closed the year 2011 one gainer to six losers while the remaining stocks closed flat. GOLDINSURE is the only gainer in the subsector while stocks of AIICO, CUSTODYINS and NIGERINS top the losers.

The sector in 2012 also closed with six losers and no gainer with CUSTODYINS, GOLDINSURE and CONTINSURE making the top loser’s.

The NSE Insurance Index recorded -13.99% losses in 2011 as ASI also recorded -17.42% losses in the same period while the Index records -17.56% YTD losses in 2012 as ASI also records +4.06% YTD gains in the same period.

NSE Insurance Index and ASI both moved simultaneously in early 2011 while the Insurance Index trades above the ASI towards the end of 2011. In January 2012, the ASI moved above the Insurance Index and remained so till date.

The NSE Insurance was reviewed and re-balanced once each in 2011 and 2012. In 2011, companies llike Cornerstone Insurance Plc, International Rnergy Insurance and Nem Insurance were removed while they were replaced with Equity Assurance Plc, Prestige Asurance, Standard Alliance Insurance Plc and Universal Insurance Plc while 2012 witnessed the removal of African Alliance Insurance Plc, Equity Assurance Plc, Lasaco Assurance Plc, Prestige Assurance and Standard Alliance Insurance  and they were replaced with Great Nigeria Insurance Plc, Mutual Benefits Assurance, Nem Insurance and Niger Insurance Plc.

The NSE Oil & Gas Index is the index with the least number of stocks. Five (5) stocks made up the index. In 2011, all the stocks closed negative with OANDO and CONOIL topping the losers’ list while similar outlook was also recorded in 2012 with CHEVRON (Now MRS) and CONOIL making the list.

The NSE Oil & Gas Index recorded -35.45% losses in 2011 as ASI also recorded -17.42% losses in the same period while the Index records -24.25% YTD losses in 2012 as ASI also records +4.06% YTD gains in the same period.

The NSE Index continued to trade slightly above the Oil & Gas Sector Index in early 2011 while the gap continues to widen as the two indices continues to trades in different direction which simply implies that the NSE Oil & Gas Index does not have direct impact on the direction of the ASI.

Most investors have increasingly lost interest in the stock market due to the extended bearish sentiments witnessed in the market, though government and market regulators reforms has not make any headway, but investors can still take position in the market for future benefits sectors such as NSE Banking, NSE 30 and Consumer Goods look good to invest in based on available figure.

For More Information contact : analyst@proshareng.com
 

Disclaimer/Advice to Readers:
While the website is checked for accuracy, we are not liable for any incorrect information included. The details of this publication should not be construed as an investment advice by the author/analyst or the publishers/Proshare. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All opinions on this page/site constitute the author’s best estimate judgement as of this date and are subject to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment decision. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions. Further enquiries should be directed to the authors – analyst@proshareng.com .