Emerging third quarter earnings failed to stimulate investors’ appetite as Nigerian equities suffered a net capital loss of N91 billion last week, a week that saw most global advanced and emerging stock markets on the uptrend.
In spite of the release of some nine corporate earnings reports last week, all key indices at the Nigerian Stock Exchange (NSE) showed a slowdown in both the momentum of activities and pricing. Beside the well-commended performance by Guaranty Trust Bank, third quarter earnings by quoted companies have largely been negative as companies struggle with foreign exchange crisis and inflationary environment.
The stock market was further constrained by the release of the latest inflation figure, showing headline inflation rate at 17.9 per cent.
Aggregate market value of all quoted equities on the NSE dropped from the week’s opening value of N9.570 trillion to close the week at N9.479 trillion, representing a loss of N91 billion. The All Share Index (ASI), the benchmark index that doubles as Nigeria’s sovereign equities index, indicated a week-on-week decline of 0.95 per cent.
There were 16 gainers against 38 losers last week compared with 22 gainers and 42 losers recorded in the previous week. Across the sectors, group indices showed widespread selling sentiments. All sectoral and group indices closed the week negative with the exception of the NSE Industrial Goods Index that appreciated by 0.52 per cent.
The NSE 30 Index, which tracks the 30 most capitalised stocks at the stock market, declined by 1.07 per cent. The NSE Banking Index dropped by 0.50 per cent. The NSE Insurance Index depreciated by 0.64 per cent. The NSE Consumer Goods Index dropped by 1.94 per cent while the NSE Oil and Gas Index slipped by 2.98 per cent.
Turnover of activities also slowed down considerably as investors appeared caught between undervaluation and low demand. Total turnover last week stood at 674.721 million shares worth N7.657 billion in 12,290 deals compared with 1.163 billion shares valued at N9.251 billion traded in 14,992 deals two weeks ago.
The financial services sector remained the most active with 495.992 million shares valued at N2.767 billion traded in 6,522 deals; thus contributing 73.51 per cent and 36.14 per cent of the total equity turnover volume and value respectively.
The conglomerates sector followed with 80.885 million shares worth N95.212 million in 536 deals. The construction/real estate sector placed third with a turnover of 32.484 million shares worth N18.498 million in 70 deals.
Investors continued to show preference for low-priced stocks, otherwise known as penny stocks, with the duo of Law Union and Rock and Transnational Corporation of Nigeria, which trade around N1, being two of the three most active stocks. With Ecobank Transnational Incorporated, the three most active stocks jointly accounted for 263.199 million shares worth N1.033 billion in 637 deals, contributing 39.01 per cent and 13.49 per cent of the total equity turnover volume and value respectively.
In the other non-ordinary equities segments, a total of 10,779 units of Exchange Traded Products (ETPs) valued at N63,890 were traded in 22 deals last week compared with a total of 119,743 units valued at N600,589 traded in 25 deals two weeks ago.
In the debt segment, a total of 1,700 units of Federal Government Bonds valued at N1.518 million were traded in a deal compared to a total of 1,510 units of Federal Government Bonds valued at N1.558 million traded in a deal in the previous week.
The performance of the Nigerian equities market was against the largely positive trend in the global advanced and emerging markets. From America to Europe and Asia, equities showed bullish outlook. In the United States of America, the twin indicators S & P and NASDAQ rose by 0.2 per cent and 0.6 per cent respectively. In the United Kingdom, the UK FTSE inched up by 0.1 per cent. in Europe, the France CAC 40 Index appreciated by 1.4 per cent.
Germany’s DAX Index improved by 1.1 per cent. In Asia, Japan’s Nikkei Index rallied by 1.9 per cent while Hong Kong’s HANG-SENG Index appreciated by 0.6 per cent.
In the emerging markets of Brazil, Russia, India, China and South Africa (BRICS), equities were on the upside. Brazil’s IBOVESPA Index rose by 3.4 per cent. Russia’s RTS Index appreciated by 4.7per cent. India’s BSE SENS Index rose by 1.5 per cent while South Africa’s FTSE/JSE Index improved by 1.1 per cent.
African markets recorded mixed performance. Egypt joined Nigeria on the downside as the EGX 30 Index indicated a drop of 2.7 per cent. However, Kenya’s NSE Index and Ghana’s GSE Index rose by 2.0 per cent and 1.3 per cent respectively.
As the October 31, 2016 deadline for Nigerian quoted companies to submit their third-quarter results draws near, this week will expectedly see strong inflow of corporate earnings reports. Most analysts expect the results to shape the market direction in the next few weeks.
“With the expectation of more third quarter 2016 earnings reports, market performance will be closely tied with investors’ view of the results. However, as seen from the bearish sentiment that dominated trading this week alongside soft activity level, investors remain cautious and are conservative on earnings. Hence, we expect equities to continue to underperform in the near term,” Afrinvest Securities stated in a preview of the market this week.