Nigeria’s ASI Loss 1.26% As Investors React To Non-Release Of Companies’ Q1 Results

Market Update for the week and Outlook for April 24-28

Nigeria’s stock market indices continued their downtrend for the second consecutive week on the back of a mixed first quarter earnings reporting season as numbers emanating from some companies are mixed. It must be noted that some of the results beat market expectations, while others came flat and even below market estimate which made the week trading highly volatile, besides the high number of companies whose share prices were adjusted for dividend payment within the week, contributing to the market closing lower.
The continued appreciation of the Naira as Central Bank of Nigeria (CBN) makes the US Dollar available in the forex market to meet different categories of demand and boost productivity, while encouraging inflow of investment. There is also the acknowledgement by foreign investors of the Federal Government’s Economic Recovery Growth Plan (ERGP) which requires the total support of all government if it is to succeed and positively impact ordinary Nigerians on the street. This implementation of the plan as desired also requires that National Assembly should hasten the passage of the 2017 Appropriation Bill to enable the nation’s economic managers hit the road running to complement the CBN’s ongoing efforts.
Many investors and businessmen in Nigeria are concerned about the low liquidity in the market and the economy resulting from delay in the 2017 Budget passage, despite the fact that billons and trillions of Naira is being recovered by the government in some of the most unlikely places thinkable. This low liquidity is gradually militating against the confidence seemingly being rekindled among Nigerians on the economy.
Meanwhile, last week, the composite NSE All-Share Index shed 320.64 points to close the week at 25,189.37 points, from an opening figure of 25,510.01 points, representing a 1.26% decline on a low volume of trade, compared to previous week’s level. The volume index of total transactions for the week was 0.72; buying position, 4%, while selling volume was 96% to continue the second week of down market. In the same vain, market capitalisation for the period closed lower at N8.73tr, from an opening value of N8.83tr, representing a 1.26% loss of value.
The week’s advancers table was dominated by low and medium cap stocks as investors focus on targeting growth stocks in expectation of their Q1 results and seeming economic recovery.
Decline of stock prices during the week further pushed the NSEASI’s year-to-date negative position to 6.27%, just as the loss in market capitalisation increased to N518.74bn, representing a 6.02% decline from the year’s opening value.
Market breadth for the week was negative and down as the number of decliners outpaced advancers in the ratio of 31:24 on low volume of trades that were bearish, owing to lean demand for stocks. This is coming at a time when more companies announcing a delay in the release their Q1 results, thereby becoming a source of serious concern for investors who suspect that numbers which would eventually emanate from such companies may be weak. Even more worrisome is the fact that no bank has yet made its first quarter earnings report available to the market, just five trading days before the 30-day deadline granted under the same post-listing rule of the NSE. This, indeed, is a cause for serious concern for market stakeholders, because it involves an industry generally perceived as most compliant of the post-listing rules, whether in terms of their quarter or full-year audited filings.
International markets were mixed over the past week as the rebounding oil price and rising political risk from North Korea, with China and Russia, two permanent members of the United Nations Security Council gearing up for face-offs, thereby becoming a major source of concern for investors at this critical time.
Japan’s Nikkei, Germany‘s DAX and major US indexes were up last week, while Britain’s FTSE 100 was down over the same period. US market indices ended the week on a positive note after a volatile period of trading characterized by political risk and uncertainty. While industrial production was disappointing early in the week, existing home sales surged by 4.4% to their best rate since February 2007 with median prices rising by 3.6%. All these played into the market movement as U.S President Donald Trump struggles to implement his promised reforms during his electioneering campaign.
In Europe, despite the fear of elections holding in France, the zone’s economy appears to be gaining momentum after IHS markets flash PMI climbed to 56.7, its highest levels since April 2011. UK’s exit of the Euro Zone has not considerably affected the region economic activities.
In Asia, investors’ cautious trading over the trouble brewing in North Korea as China and Russia warm up for problems saying there may be no winner at the end of the day. These political risks are likely to continue to weigh down the markets.
Back home, the benchmark index opened the week on a negative note, losing 1.29%, which was reversed in the following trading session with 0.47% gain and was short-lived with a loss of 0.19% on Thursday which was sustained in the last trading session of the week with lost of 0.35% to bringing the week’s cumulative loss to 1.26% on a weak demand for stocks irrespective of the Q1 earnings reporting season.
The composite index and all sectoral indices for the period were in the red, except for NSE Pension, NSE Oil/Gas and NSE Asem that were in the green to close the week.
The week’s total transaction, measured by aggregate volume and value declined by 24.64% and 1.99% respectively to 896.75m shares from 1.19bn shares worth N5.92bn, as against N6.04bn in the previous week.
During the week, the share prices of Total Nigeria, Unilever, Custodian & Allied Insurance, Fidelity Bank, Pharm Deko and Nascon Allied Industries were adjusted for dividend. Meanwhile, Unilever, Nigeria Breweries, Africa Prudential, United Capital, Trans nationwide Express and Secure Electronic Technology made available their Q1 results to the investing public.
Transcorp and Africa Prudential led the advancers’ log, gaining 22.88% and 9.70% respectively to close at N0.97 and N2.60, driven by low price attraction, while the flip side was topped by Fidelity Bank and 7-Up, which suffered 20.59% and 14.25% slide to close at N0.81 and N89.95 each respectively.
Market Outlook
The market this week is likely to look up as more Q1 financials hit the market with some surprises and disappointments.
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