It was a downtrend across most major African equities markets last week as investors showed keen interest in advanced economies.
From Nigeria to Ghana and South Africa, African equities traded mostly in the red as domestic socio-political and economic risks hunched African investment horizon.
Ahead of the meeting of the Central Bank of Nigeria (CBN) from Monday to Tuesday next week, Nigerian equities recorded the highest depreciation among tracked African markets.
In spite of emerging data showing improved macroeconomic condition, most pundits expected Nigeria’s apex bank to retain its hawkish tightening stance by retaining key recession-era rates and policies.
Benchmark indices at the Nigerian stock market showed a week-on-week decline of 2.65 per cent last week, indicating that the market value of all quoted equities depreciated by some N325 billion during the week. It was a largely bearish market with nearly two decliners for every advancer as investors realigned their portfolios ahead of the Monetary Policy Committee (MPC) of the CBN.
The National Bureau of Statistics (NBS) had recently released major economic data, showing continuing improvement in the Nigerian economy. The NBS at the weekend indicated that inflation rate dropped for the seventh consecutive month as the Consumer Price Index (CPI)-which measures inflation rate declined from 16.05 per cent in July to 16.01 per cent in August.
The NBS had earlier released latest foreign trade data for the second quarter of 2017 showing that Nigeria has a positive trade balance for the second consecutive quarter. The report showed aggregate trade rose by 37.3 per cent to N5.6 trillion in 2017 compared with corresponding period of 2017. With a quarter-on-quarter increase of 7.7 per cent, the trade balance for second quarter 2017 stood at N506.5 billion as against a deficit of N572.1 billion in second quarter 2016.
The latest economic production data had shown that Nigeria exited recession in the second quarter of 2017 as the Gross Domestic Products (GDP) rose on a year-on-year basis by 0.55 per cent as against a decline of 0.9 per cent in the first quarter.
Nigerian investors however appeared to be driven largely by profit-taking sentiment during the week, with sell pressure building across the sectors. The All Share Index (ASI)-the common value-based index that tracks share prices at the Nigerian Stock Exchange (NSE) declined by 2.65 per cent from its week’s opening index of 35,957.24 points to close weekend at 35,005.57 points.. Aggregate market value of all quoted equities also dropped from its week’s opening value of N12.393 trillion to close weekend at N12.068 trillion. Consequently, the positive average year-to-date return at the equities market slipped to 30.26 per cent..
With 45 decliners to 23 advancers, all sectoral indices at the Nigerian market closed in the red with the exception of the NSE Oil and Gas Index which rose marginally by 0.17 per cent. The NSE 30 Index-which tracks the 30 most capitalised stocks at the NSE, dropped by 2.47 per cent. The NSE Banking Index recorded a week-on-week return of -2.30 per cent. The NSE Insurance Index dipped by 0.33 per cent. The NSE Consumer Goods Index slipped by 2.52 per cent while the NSE Industrial Goods Index recorded the highest week-on-week depreciation of 4.39 per cent.
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The performance at the Nigerian equities market was largely in line with the dominant negative sentiment across the African equities market. Ghana’s benchmark index showed a decline of 2.3 per cent while South Africa’s FTSE Index indicated a week-on-week drop of 0.1 per cent. However, Egypt’s EGX Index appreciated by 1.3 per cent.
Across the global advanced and emerging equities markets, it was a largely positive week. The twin indices for the United States of America (USA)- the NASDAQ and S & P 500 rose by 1.4 per cent and 1.5 per cent respectively. Germany’s DAX Index appreciated by 1.2 per cent. France’s CAC Index trended upward by 2.2 per cent. Brazil’s IBOVESPA Index spiraled upward by 3.1 per cent while India’s Bombay Stock Exchange (BSE) benchmark index appreciated by 1.8 per cent. Japan’s Nikkei Index, Hong Kong’s Hang Seng Index and China’s Shanghai Composite Index closed flat. However, with another terror attack rocking London, United Kingdom’s FTSE Index declined by 2.0 per cent while Russia’s RTS Index slipped by 0..5 per cent.
At the Nigerian equities market, there were 23 advancers against 45 decliners last week compared with 28 advancers and 38 decliners recorded in the previous week. Most equities meanwhile remained dormant with 104 flat stocks last week as against 105 unchanged stocks in the previous week. Neimeth International Pharmaceuticals led the decliners, in percentage terms, with a drop of 15.66 per cent to close at 70 kobo. Skye Bank followed with a loss of 11.86 per cent to close at 52 kobo. May & Baker Nigeria declined by 10.67 per cent to close at N2.68. Flour Mills of Nigeria dropped by 8.67 per cent to N27.40 while Linkage Assurance dipped by 7.81 per cent to close at 59 kobo per share.
On the positive side, NEM Insurance Company recorded the highest gain of 19 per cent to close at N1.19. C & I Leasing rose by 12.26 per cent to close at N1.19. International Breweries appreciated by 9.5 per cent to close at N38.95. Newrest ASL rose by 9.06 per cent to close at N6.50 while UAC of Nigeria appreciated by 5.82 per cent to close at N15.45 per share.
Total turnover during the week stood at 896.62 million shares worth N15.37 billion in 17,048 deals, a marginal increase on a total of 887.02 million shares valued at N17.45 billion traded in 16,955 deals two weeks ago.
The financial services sector remained dominant with a turnover of 708.05 million shares valued at N7.79 billion in 9,164 deals; representing 79 per cent of the total equity turnover volume and value respectively. Consumer goods sector staged a distant second with 56.502 million shares worth N5.51 billion in 3,414 deals while the conglomerates sector ranked third with a turnover of 32.44 million shares worth N106.69 million in 744 deals.
Three banks-Diamond Bank Plc, Zenith International Bank Plc, Guaranty Trust Bank Plc were the most active stocks, accounting for 336.18 million shares worth N5.68 billion in 2,936 deals, representing 37.5 per cent and 37 per cent of the total equity turnover volume and value respectively.
Also traded during the week were a total of 1,265 units of Exchange Traded Products (ETPs) valued at N145,720 in eight deals compared with a total of 3,000 units valued at N31,590 traded in a deal in the previous week.
As the equities reopen on Monday to the start of the CBN’s MPC meeting, most pundits expected the apex bank to retain its key rates, a revision could be a surprise to the markets. The apex bank is expected to retain the Monetary Policy Rate (MPR) at 14.0 per cent, the Cash Reserve Ratio at 22.5 per cent, Liquidity Ratio at 30.0 per cent and the asymmetric corridor around MPR at +200 and -500 basis points.
With a status quo ante from the CBN, the major driver at the equities market will be early positioning and bargain-hunting transactions as the third quarter earnings season approaches.
“In the week ahead, we expect to see some bargain hunting in early trading sessions even as investors take advantage of bargain opportunities in the market,” Afrinvest Securities-a Lagos-based dealer at the NSE, stated in advisory note on trading mood in the new week.