Thursday, July 11, 2013 / The Analyst
With the end of the Q2 ’13 and the developments in the first two weeks of H2 2013, it is important to take stock and review how various assets have performed in the first half of 2013 and assess the outlook for the rest of 2013 and, more importantly, the election campaign and election proper years.
In the first of a series of market reviews and analysis to be issued leading up to the launch of the new ‘Analyst’ portal to reflect the shift in the use of market data in our clime; we intend to focus on the Nigerian stock market, the African stock market, sectoral indexes, corporate actions, economic impact assessments and the state of the market recovery – compliance, governance, listings and issues still outstanding.
The rate of growth or of the market recovery has expectedly ‘slowed down’ or effectively ‘evened-out’ to fairly reflect the state of liquidity, depth and float defining the key fundamentals of the Nigerian equity market; putting pressure on its journey towards an efficient maximisation of peculiar market advantages
At the end of H1 2013, activity levels on the bourse appeared upbeat on the back of an impressive +28.80% half-year performance; enabling it to close amongst the leading exchanges within the African region; compared with a modest gain of +4.19% recorded in the previous year’s corresponding period. Definitely, there exists an above moderate increase in the level of market confidence and improved risk appetite towards investment in equities on the Nigerian bourse; in spite of the well documented limitations it does have.
A detailed analysis by the research team revealed that participating investors were ‘value driven’ throughout Q1'13, with intermittent appearance and growth in risk-appetite, buttressing the moderate market confidence noted above, as value stocks across the key sectors recorded impressive price rally. A cursory look at the NSE Insurance index led the sectoral indices with +30.42% appreciation followed by NSE Oil & Gas, which recorded a +28.61% gain to buttress our position on the increase in risk-appetite during the period.
Bargain activities in Q2'13 appeared relaxed as stocks experienced price correction considerably with slight decline in investors commitment- The -16.61% fall in market volume turnover buttressed this assertion further while index fell from its peak of 40,012.66 basis points recorded on June 11, 2013 to close at 36,164.31, shedding above 3,000 basis points.
During this period under review, Insurance and Oil & Gas stocks were the worst hit as reflected in the NSE sectoral indices - where NSE Oil & Gas led the losers among the sectoral indices with -13.45% loss, followed by NSE Insurance indices which dipped by -10.36%.
The low liquidity in the market and significant low level of participation from the retail end of the market remains a concern; even as the market remains equally concerned about the level of products and funds available relative to economic size.
Not-so-positive factors in the capital market
rate of adaptability to change and technology;
unchanged posture of MPR @ 12%;
low lending to the private sector and absence of funding/margin loans;
illiquidity / marketability of stocks;
attractive rates in money market and other alternative investment vehicles;
crowding out effect of FGN and state government bonds in market; and
sustained growth in lending rates.
Positive Factors in the capital market
market- making activities;
sustained efforts to revive investors confidence;
low valuation of stock with possibilities of sustained upsides
Developments anticipated in the coming months:
Improved Q2 earnings report;
Inflation and interest rates outlook;
Change in monetary policy rates;
Straight –throughput processing @NSE;
The Market: ASI records 7.84% gain in Q2’ 13 on improved risk appetite
The market recorded a total volume of 26.50 billion units valued at N336.58 billion (US$2.10 billion) exchanged in 380,946 deals compared to 26.47 billion units valued at N172.03 billion (US$1.04 billion) exchanged in 237,938 deals in Q2 2012. Comparatively, we see a growth of +0.11% in volume and +95.65% in value when compared with the previous year’s comparable period data, respectively.
Market capitalization this quarter appreciated by N692.96billion (US$4.33 billion) as against appreciation by N345.45billion (US$2.09 billion) recorded in Q2 2012. Market Cap. recorded a positive figure of N120.52billion (US$730.36million) in the preceding year’s comparable period.
The NSE All-Share Index Movement
The key benchmark indices experienced consistent and steady bargain to record an impressive gain of 7.84% for the quarter. It however closed weak at 36,164.31 following the heavy profiteering observed towards end of the quarter.
The patterns observed reveals that the market is technically bearish in short term and remains neutral long term as could be seen from the NSE ASI moving averages trend with an index of 36,164.31 as at June 28th, 2013 trading below its 20-days and 500-days; but above its 200-day moving averages of 37,688.86, 36,316.20 and 31,151.22 respectively.
Comparison of H1 2012 and H1 2013 Market Performances
In the period under review, ASI recorded +7.84% appreciation compared with +4.59% appreciation recorded in Q2 2012. See table below for more insight
1. EVANSMED, Livestock, Forte Oil, McNichols and CAP top Q2'13 Gainers