June 02, 2010 2555 VIEWS
Proshare

 

“Notwithstanding the bearish trend recorded in the month and the marginal appreciation of the preceding month, activities on the floor of the NSE continue to suggest that the indicators of a positive trend still remain. The level of transactions on the NSE remains on the sustained uptrend on the monthly basis. ”
 
Equities market in the month of May commenced on a positive note with the upbeat of the last two trading days of the month of April extending into the month, to last only for the first four trading days after which the bears took the centre stage and held sway for most of the trading days of the month till the last two days before the May 31, 2010 public holiday.
 
The first trading week of the month recorded the highest appreciation of 3.97% to close at 27,503.37, followed by a marginal appreciation by +0.91% in the following week to close at 27,753.13. The remaining two trading weeks recorded depreciations of higher magnitudes which closed at -3.49% and -2.25% for the third and fourth week respectively.
The transaction trend in the month showed a decline in the investors’ commitment to the capital market, and this was noticed to have commenced in the month of April where the impact of bears was evident as the month consequently closed with marginal appreciations. The cyclical month start and close patterns indicate an adjustment of sorts.
A cursory review of the NSE sectoral indexes revealed that the financial stocks contributed more to the negative outlook recorded in the month, followed by the depletion suffered by many of the blue chips stocks in the third and fourth weeks respectively.
The declines recorded in the first and third weeks in the Petroleum Marketing sector was overridden by the positive outlook of the remaining two weeks of the month. The Petroleum sector Index depreciated by 4.54% in the first week and by 2.20% in the third week. However, there was impressive growth of 7.23% in second week and further appreciation by 1.39% in the fourth week. Food and Beverages eventually recorded the highest appreciation in the month followed by Petroleum Marketing sector.
The trend showcased the trend recorded in the market in the month under review. It showed the investors’ appetites did not swing in favour of financial stocks as such were subjects of high rate of volatility. The bearish trend recorded in these financial stocks could be attributed to dearth of returns in these sectors, most especially in the insurance stocks and the CBN rescued banks. 
Notwithstanding the bearish trend recorded in the month and the marginal appreciation of the preceding month, activities on the floor of the NSE continue to suggest that the indicators of a positive trend still remain. The level of transactions on the NSE remains on the sustained uptrend on the monthly basis.
The transaction volume in the month of May posted lower figures when compared with the preceding month figures, the transaction value closed as the third lowest after January and February. However, there are indications that investors’ confidence may grow in the days ahead, even as the political atmosphere gets clearer by the day.
This expectation is hinged on the commitments given by the Central Bank of Nigeria to ensuring more ease of liquidity into the system which should stimulate activity on the floor and price movements of stocks; to reverse the slide in the rate of recovery of the market.
The real progress recorded in the passing of the Asset Management Company of Nigeria (AMCON) bills by the House of Reps and Senate respectively must therefore represent a key turning point in resolving the niggling issue of huge margin loans and deteriorating assets and collaterals. The bills, now undergoing harmonisation; should help deal with the niggling margin loan problems accentuated by declining assets quality and deteriorating collaterals.
The passage of the bill has been impacted by a timing issue arising from the common year end and 2010 Q1 results of banks released so far, which has seen investors wary of each bank position become a source of further enquiry.
The commitment of the regulatory authorities at ensuring a more disciplined and professional capital market continues to impact the market and the change process. It is expected that some semblance of stability will have been reached by the half year to ensure a clearer market in terms of reform direction and enabling opportunities.
For the month of May, the equities market recorded 8.244bn units valued at N76.112bn (US$504.06m) exchanged in 180,388 deals compared with a total of 12.598bn units valued at N108.311 billion (US$722.07m) exchanged in 206,206 deals recorded in the month of April.
The transaction in the preceding year comparable period stood at 7.595bn units valued at N54.16bn (US$338.42m) exchanged in 131,647 deals. Comparing the volume and value traded in the month with the previous year’s comparable period showed +8.59% and +40.52% rise above the volume and value recorded in the previous year’s May respectively.
In the same vein, comparing the volume and value traded in the most recent previous month showed that the transactions activities closed on the downward note. The volume traded in the previous month to April 30th 2010 which stood at 12.597bn units valued at N108.311bn (US$723.520m) exchanged in 206,206 deals was -35.56% below the volume traded this month.
In the course of the month, the All-Share index recorded a -2.44% to close at 25,183.21 as against +0.89% marginal appreciation of the previous month. The negative performance was in contrast with +38.51% appreciations recorded in 2009 May to close at 27,700.24.
The ASI trend this month when compared with the preceding month to April 30th, 2010 was showed the trend of sustained decline in market performance as the previous month recorded marginal growth of +0.89% comparedwith +12.97% growth recorded in Marchappreciations.
Market capitalisation in May depreciated by N29.597bn (US$197.707m) as against with N117.781bn (US$ 786.781m) market capitalisation gain recorded in the previous month and. The preceding year comparable period recorded N1.887trillion (US$12.608bn) appreciation
This trend recorded in the month was in part impacted by the factors outlined in page 4 above.
The NSE All-Share Index Movement
 The NSE index which began on an impressive note in the month of May with sustained appreciations for the first four trading days turned south and remained with the trend for most of the remaining trading days of the month. The month declined by -2.44% to close at 26,183.21 as against +38.51% appreciations recorded in the preceding year comparable period to close at 29,700.21, and the preceding month appreciation by +0.89% to close at 26,453.20. The month of May closed at the worst performing month in the year.
The major decline in the month occurred on 17th, 21st, 24th, 25th and 26th of the month with -1.33%, -1.62%, -1.43%, -1.87% and -1.29% depreciations respectively. These major declines contributed mostly to the decline recorded in the month.
 
Barring any unforeseen negative news in the coming trading days, the upbeat that resumed in the latter days of the month should continue (with reasoned caution based on last months pattern) in the month of June, though not without declines in between.
Meanwhile, at the end of the last trading days of the month, All-Share Index closed below the figure recorded at the close of 2nd January 2009 by -16.50%.
At the close of the last trading day of the month, All-Share Index traded below its 20 days and 50 days moving averages of 26,934.03 and 26,601.81 respectively but above its 200 days moving averages of 23,361.03.
The All-Share Index started trading below its 20 days moving average on the 21st May, 2010 and below its 50 days moving averages on the 24th May 2010. This was due to depletion recorded in the All-Share Index towards the latter part of the month. The ASI trading above its 200 days moving averages is technically suggesting a sustained bullish trend.
 Market Dynamics
The market dynamics as graphically illustrated below showed the appreciation and depreciations on the daily basis. The profit taking activities and all the other causative activities in the month were responsible for the dynamics recorded.
 Market Dynamics in the preceding year comparable period (May, 2009)
Source: NSE, Proshare Research
  
Comparison of 2009 and 2010 Market Performance
The market performance in May 2010 when compared with 2009 comparable period showed a declining trend. In the period under review, ASI recorded -2.44% appreciation compared with +38.20% appreciations recorded in 2009 May. The scenario revealed that the in the preceding year comparable period was a clear departure from the month under review.
In May 2009, the ASI recorded only five depreciations in the entire month, as against massive declines in the nine trading days recorded in the month under review.
Source: NSE, Proshare Research
 
From the table above, the year to date performance of 2009 closing at -5.28% indicated a woeful performance when compared with the positive year to date performance of 2010 closing at +25.65%.
The positive growth of +8.15% recorded in April 2009 and 38.51% appreciations recorded in May 2009 when compared with +0.89% appreciations and -2.44% depreciations of April and May 2010 respectively showed that the first three months in 2009 posted more of declines.
 Sectoral Index Movements
Source: NSE, Proshare Research
 
In the month under review, NSE-Food and Beverages index emerged the best performing sector with +6.45% appreciation, followed by Oil and Gas index which appreciated by +3.16% and NSE-30 index followed with insignificant growth by +0.01% appreciation. However, the declining trends recorded in Banking and Insurance sectors stood at -3.62% and -3.62% compared with -4.22% and -5.48% recorded in these sectors in the previous month. This shows the pattern of financial stocks performances.
April and May 2010 Sectoral Indexes Compared
In the chart above, all the sectoral indexes in the preceding comparable period outperformed the month under review very significantly. This could also be seen as a pointer to the impressive performance recorded in the All-Share Index for the period. As against the bearish outlook of the financial stocks in May 2010 (NB: financial stocks in May 2009, especially the banking stocks, were among the best performing sectors in the period).
May 2010 and May 2009 Sectoral Indexes Compared 
 
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