August 01, 2008 707 VIEWS
Proshare

 

Investors heave a sigh of relief as market rebounds.

 

 

Activities on the floor of the Nigerian Stock Exchange saw the return of the bulls as the major performance indicators recorded an upswing. The NSE All-Share-Index rose by 533 basis points to 53,422.78 from 50,422.78 points recorded the previous week. The continuous decline recorded in the past sent negative signals as market watchers hoped for a renaissance in the market.

 

 

Most investors could at least heave a sigh of relief as majority of stocks spur in prices for the week under review. However investors are still uncertain about the sustainability of the upbeat market mood.

 

 

Market capitalization increased by the same margin, due to the absence of new listings. The current bullish trend could be as a result of increased activities in the banking sector and the myriads of results released for the week under review. Although the culminating factors militating against the resurgence seems to have been dealt with, the bears still held sway as an eroded investors confidence needed to be rejuvenated.

 

 

The impervious nature of the market to the attractive prices of most stocks and juicy corporate action were due to continuous cautious trading and liquidity constraint in the market. However, this weeks performance appears to have offered some reprieve as most stocks were northwards bound.

 

 

The bulls run that greeted the stock market saw the index sky-rocketed by 13.30% as at March 5th, 2008 to 66,371.20 while total market capitalization became N12.64 trillion. However, as at Thursday 24th of July which is the YTD nadir, total market capitalization was N10.03 trillion. On the face value about N2.61 trillion of investors paper money had been lost to the bearish tide.

 

 

However, if one is to take into account the plethora of listings on the exchange, the decline would definitely be in excess of what was recorded.

 

 

This exacerbating market performance has also established a rather unusual trend as an almost immediate price plunge is experienced by newly listed companies as opposed to market tradition were prices of newly listed stocks spur aggressively. The reverse has been the case where most stocks fight against the tide rather than glide in an uptrend manner.

 

 

Transactions were downbeat with total volume and value traded declining by 19.368% and 21.86% respectively. A total of 3.30 billion units valued at N37.37 billion were traded as against 4.11 million units valued at N47.83 billion recorded the previous week.

 

 

Invest & Allied insurance sustained its dominance of transactions. It finished as the top trader for the week with over 1 billion trades recorded.

 

 

The corporate action in view for First Bank Plc might be attributory to the activity recorded in the stock as over 98 million units exchanged hands. Other stocks which were actively traded during the week include the likes of Fidelity Bank, Oceanic Bank, Access Bank and Skye Bank.

 

 

Out of a total of 128 stocks which traded on a daily basis, 69 companies were able to make positive price gains, 35 closed on a flat note and price declines were notably among 24 companies. The banking sector witnessed northwards movement as majority of them displayed price appreciations.

 

 

Skye Bank closed the week as the best performing stock with a 21.43% price upsides. The stock was trading at favourable multiples of 10.14 x before the rally. This suggests the stock was under-valued when compared to its peer average of 17x-19x. Unilever came closely behind notching up 21.42% to close at N21.99. On the converse sides, Chevron sustained its free fall for the second week running tumbling by 17.72%. A rather dismal result coupled with and over-valued price appears to have been contributory to this southwards movement.

 

 

The postponement of  “uniform year end for banks seems to have offered some respite for investors. However, if the apex authority raises MPR at its next scheduled meeting, this might further suppress market performance.

 

 

Earlier in the year, the CBN increased the MPR by 25 basis points from 10% to 10.25% in a bid to curb the inflationary pressure. The inflation rate in Nigeria increased to 9.7% by May 2008 from 6.6% at the end of December 2007. If the CBN wish to decrease the money supply, they will increase the interest rate making it more attractive to deposit funds and reduce borrowing from central bank. On the other hand when they wish to increase the money in supply, they will decrease the interest rates.

 

 

A market reshuffling is expected in the weeks ahead with intermittent positioning and profit taking. The index is expected to hover around the current point. Albeit, an already depleted investors confidence might forestall an anticipated resurgence. The market definitely seems poised for a resurgence but how soon this will be depends on a change in investors perception of the investment terrain. Otherwise, cautious trading might continue to dictate market rhythm.

 

 

 

 

 

ADVICE TO READERS

While the Proshare website is renowned for its  accuracy and painstaking attention and commitment to factual data, we are not liable for any incorrect information included. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions.This report is based upon information from various sources that we believe are reliable. However, we do not make any representation as to the accuracy or completeness of the report. This report is not an offer to buy or sell, nor a solicitation to buy or sell the securities mentioned therein. This report is provided solely for the information of clients of LeadCapital Limited (LeadCapital) who are expected to make their own investment decisions without sole reliance on this report. LeadCapital and PROSHARE (publishers of the report under approval) accepts no liability for any direct or consequential loss arising from any use of this report or its contents. Investments can fluctuate in price and value and the investor may get back less than was originally invested. Past performance is not necessarily a guide to future performance. This information has been issued by LeadCapital, which is licensed by the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE). Enquiries relating to any matters in this report should be directed to Bamidele Adewole (01 4611269 ext 130) bamidele.adewole@leadcapitalng.com

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