2017: Equities rebounds but not yet uhuru

The year 2017 was indeed a good one for equities investors on the Nigerian Stock Exchange (NSE) given the record of lift in the indices as against year 2016 which was rather a challenging year for the country with the decline in the macroeconomics of the country.

By the close of trading activities on Friday at the NSE, Investor gained 43.34 per cent of their investment given the growth in NSE All-Share Index that has appreciated to 38,243.19 basis points in 2017 from 26,874.62 basis points it opened this year.

The market growth has been driven by surge trading on some blue chip companies that include Dangote Cement Plc, Nestle Nigeria Plc, Guaranty Trust Bank Plc, Zenith Bank Plc and Presco Plc.

For instance, the price of Dangote Cement has appreciated by 37.9 per cent or N66 to close last week at N230 while Nestle Nigeria price has added 82 per cent or N665 to close at N1,555.99 per share.

The likes of Guaranty Trust Bank and Zenith prices have gained 63 per cent or 72.9 per cent to close at N40.75 and N25.64 respectively.

However, in the year 2017 the Nigerian Bourse recorded 65 gainers as Dangote Sugar Plc top the list with 227 per cent gain having closed the year with N20 per share against N6.11 kobo per share it opened year 2017, while International Breweries Plc shares advanced by 195 per cent to close the year at N54.50 kobo per share. Fidelity Bank Plc stocks followed with 193 per cent as it opened the year at 84 kobo to close the year at N2.46 kobo.

The Nigerian equities mmarket had indeed come a long way after the market crash in 2008, thus been mentioned among the global stocks that did well in 2017.

According to a report by CNN last week, the Nigerian stock market was among leading big stock market gains in 2017 alongside Argentina, Turkey, USA.

“The Nigerian All-Share index is still miles below record highs set in early 2008, but a 42 per cent rally in 2017 has helped to close the gap.

The index suffered mightily in 2015 and 2016 as low oil prices, militant attacks, currency troubles, elections and Ebola hit investor sentiment.

But oil prices have moved higher, the central bank has made it easier to swap currencies and the economy has snapped out of recession,” explained Zin Bekkali, founder and CEO of Silk Invest in the report.

However, out of the 172 listed companies on the Nigerian bourse, 63 quoted firms which represent about 37 per cent of the stocks currently listed recorded no price movement as at December 29 as against 35 per cent of such stocks recorded in 2016.

Amid domestic and global macro economy challenges, investors on the Nigerian Stock Exchange (NSE) in 2017 deserted these stocks over poor corporate governance and weak government policies.

Analysis revealed that out of the 63 stocks; stocks from the financial services sector dominated the list with 28 stocks, services follow closely with 10 stocks, Construction/Real Estate has five while ICT, Healthcare and Oil & Gas have four each. Consumer Goods  has two, Agriculture, two; Industrial Goods, three and Natural resources with one made the list.

While some stocks deprecated in prices, these 40 per cent stocks were not traded, remaining at the same price for the second consecutive year.

A total of four out eight stocks on NSE ASeM Index remained flat in 2017 as most companies struggle to grow earnings and expand businesses.

The four companies their prices remained unchanged are Afrik Pharmaceuticals Plc, Anino International Plc, Capital Oil Plc and Juli Plc.

The NSE Insurance Index might have gained 9.99 per cent this year but the growth has been driven by majorly two insurance companies out of the above 20 listed  Insurance companies on The Exchange.

Two stocks that have been driven the NSE Insurance Index are Axamansard Insurance Plc and N.E.M Insurance Co.(Nig) Plc.

Over 18 Insurance stocks were dumped by investors as their prices remained flat (N0.50) for the second consecutive year.

The likes of Cornerstone Insurance Plc, Equity Assurance Plc, Great Nigeria Insurance Plc, Goldlink Insurance Plc, Guinea Insurance Plc, Consolidated Hallmark Insurance Plc, Lasaco Assurance Plc, Mutual Benefit Assurance Plc, Niger Insurance Co. Plc., Prestige Assurance Plc, and Regency Alliance Insurance Company Plc prices remained flat.

Others are Royal Exchange Assurance Plc, Sovereign Trust Insurance Plc, Standard Trust Assurance Plc, Standard Alliance Insurance Plc, Unic Insurance Plc, Unity Kapital Assurance Plc and Universal Insurance Company Plc closed for the second consecutive year at N0.50 per share.

Weak earnings stocks thus witnessed profit-taking this year as investors continued to trade with caution not to lose their investment.

From records from the NSE, investors dump stocks in the Information Processing companies include Chams Plc, E-Tranzact International Plc and Courteville Investments Plc; Media/Entertainment, Daar Communications and Other Financial Institutions, Deap Capital Management & Trust Plc Since becoming Moribund, Investors have decided not to trade Dunlop (Nigeria) Plc; Crop Production, FTN Cocoa Processors Plc

Others are Evans Medical Plc, Omatek Ventures Plc, Premier Paints Plc and R. T. BRICOE (NIG.) PLC, among others.

The Managing Director of APT Securities Limited, Mr. Garba Kurfi explained that investors in the capital market are wiser with their investment. He noted that investors are interested in performance of listed stocks.

“The present growth in the capital market is driven by foreign investors that do not trade in penny stocks. Foreign investors’ trade stocks with impressive fundamentals but if a stock prove to have fundamental, they trade those stocks.

“Take for instance, C & I Leasing. was trading as low as N0.50 but today, C & I has risen to N1.32. The company has delivered good turnover and good performance. Investors in the capital market are wiser now and it takes only one performance to grow a particular stock.

Looking at the Insurance Sector, he noted that some of the Insurance companies were paying dividend and yet trading at Par value. “The simple reason is that they have large issued share capital and institutional investors are not ready to mop-up the excess,” he said.

Speaking on the new pricing rules to be adopted by the Exchange, he said, it would allow listed stocks to be active. “It will allow every stock to be priced according to its fundamentals. Some of these stocks are hiding under the minimum price of N0.50. it makes those stocks liquid since buyers cannot avoid to buy. If you allow the market to dictate the price, then you encouraging black market. Price appreciation and depreciation is a factor of demand and supply,” he said.

Also Mr Johnson Chukwu, Managing Director, Cowry Assets Limited, noted that the dumped stocks by investors are illiquid, stressing that investors are not keen on trading those stocks.

According to him, “It is an indication that those stocks are illiquid. Therefore, the volume of trading on daily basis is not enough to move their market price. A times, there may be trade on them but the volume traded are not enough for market movement. Those companies are not in a strong financial position and investors are not keen to trade on those stocks.”

The Exchange by January will begin the implementation of new pricing rules that will remove the stopgap that has supported stocks at their nominal value.

According to NSE, the new rules will allow shares of quoted companies to trade for as low as one kobo.

The new rules will effectively remove the current rule, which places minimum allowable price to trade for any stock at its nominal value, irrespective of the market forces. The new rules stipulate that “notwithstanding its par value, the price of every share listed on the Exchange shall be determined by the market, save that no share shall trade below a price floor of one Kobo per unit.”

Par value is the nominal value of a share as stated in the Memorandum of Association of the company while price floor means the amount below which the price of one unit of a share shall not be permitted to trade, and the minimum amount which must be paid for a share in the event of a drop in the unit price of that share.