NSE Building Picture

The market capitalisation of equities listed on the Nigerian Stock Exchange (NSE) fell by N1.3trillion between April and July 10, 2015. It declined from N12.135 trillion recorded on April 2 to N10.835trillion on Friday, July 10.

The decline in market value was attributed to the rush by foreign and local investors to sell their stocks due to the rising shortage of dollars on the foreign exchange market.

Analysts at Vetiva Capital Management Limited in a report described last week as another red week for Nigerian stocks as bears tightened their grip on the NSE. “Sustained domestic macro concerns and the renewed decline in global oil prices fueled a selloff on the exchange across five consecutive days. Despite strong advances in the industrial goods sector at week open, negative sentiment in the consumer goods and financial goods sectors continued to offset gains, steering the NSE ASI to its 8th consecutive red close,” they said, adding that the “bearish market sentiment to persist in the coming week even as bank earnings season kicked off this past week on a negative note.”

Similarly, analysts at Meristem Securities Limited said the Nigerian equities market All Share Index fell by 3.46 percent in the first half of 2015 as a result of spill-over effects from falling global oil prices as well as fragile domestic economic fundamentals and unimpressive company performances. “Although we expect the prevailing challenges to persist into the second half of 2015, we anticipate intermittent upswings in market mood, driven by trickles of positive news inflow from the political space and position-taking in fundamentally justified stocks.”

The analysts said they were not optimistic about the banking sector’s prospective performance for the second half of the year, given the rising cost of funds, limits on non-interest income generation, impaired economic fundamentals and declining quality of loans, even as higher yields on assets are expected. “Pricing of stocks might also be dragged by expected lower dividend yields from the need to conserve capital. So, “based on the uninspiring outlook for the entire economy for the rest of the year, we anticipate this bearish mood to be sustained.”

The Meristem analysts stated that the insurgency in the Northern part of the country, poor nature of supporting infrastructure, and devaluation of the currency had dragged the agricultural sector in the year.“We are not expectant of a turnaround in the near term, as the listed agricultural sector companies are being affected by the supply glut in the global rubber industry and consequent fall in commodity prices, devaluation of the naira and the effect on imports of some raw materials, among others.”

Moreover, the consumer goods sector had a stormy half year due to the direct impact of economic realities on the sector. It blamed the naira devaluation and the closure of the RDAs market for the sharp decline in the equity market.

Also, “the oil and gas sector, as gauged by the NSEOILG5 index, settled 3.04 per cent lower, with two stocks (Total (+15.79 per cent) and CONOIL (+7.19 per cent)) closing positive in H1:2015. Considering the challenges besieging the downstream sector with respect to accumulating subsidy payments and FX differentials, amongst other structural bottlenecks, we do not foresee a major upside heading into H2:2015. Therefore, we expect the tempered returns seen in the first half of the year to be sustained.”

By Dike Onwuamaeze

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