Trading performances at the Nigerian Stock Exchange (NSE) got poorer after last week's proceedings as investors record more losses, making it a total loss of over N429 billion or 5.42 percent decline since trading began this year.
The NSE market capitalisation of the 194 First-Tier equities, which opened the year at N7.913 trillion, had appreciated to N8.884 trillion during the first quarter of the year before depreciating to its current figures of N7.484 trillion as at last Friday. At the close of Friday's trading, the Exchange All-Share Index shed 5.54 percent or a loss of 1,373.08 units year-to-date, from 24,770.52 basis points to 23,397.44.
Some analysts said that the negative market sentiments persist as a result of the gradual fall of investors' appetite for equities which resulted to cut down in investment activities for safety.
Market watchers also said trading activities are weak because of unstable trend and growing volatility witnessed due to the pessimistic position and low risk appetite of investors as market experienced huge selling activities continuously.
The economic intelligence unit of Access Bank, in its recent market review, said, "Despite the Central Bank of Nigeria's (CBN's) announcement that it intends to complete banks recapitalisation process by September 30, 2011, equity investors still indulge in profit taking," adding that "the monetary policy committee's decision to increase its anchor rate may have encouraged a divestment from equities into fixed income securities." Stockbrokers at GTI Capital, a stock broking firm, said the poor trading performance at the NSE could be attributed to the "massive sell pressure combined with on-going investors' apathy on equity investment." They said even the improved positive second quarter results of some quoted firms could not stop the dip recorded at the Exchange causing the All-Share Index to relapse below 23,500 points.
Analysts at Proshare Nigeria, an investment advisory company, said the outlook in the year 2011 has not been impressive "trending below expectation." They noted that first quarter closed bearish which has been attributed to risk aversion approach taken by investors due to unrest and high tension in the political terrain coupled with unstable high monetary rates aside the persistent illiquidity in the market.
Erring Companies
However, to further strengthen transparency in the market thereby boosting investors' confidence, the management of the NSE last week placed the shares of 24 companies on a "full suspension" while nine others were placed on "technical suspension." The affected companies, which include Dangote Flour Mills, Ikeja Hotel, and 22 others, were placed on full suspension for failure to submit their financial statements for the year ended December 31, 2010. The nine companies on technical suspension were sanctioned for failure to submit their financial statements for the first quarter ended March 31, 2011.
Placing a quoted company on full suspension means there will be no transaction on its share until the suspension is lifted, while a stock on technical suspension implies that there will be trading but no price movement on its share.
The NSE had last month said non rendition of financial accounts to the market is a violation of the Exchange's rules. "This is in violation of the Post-Listing Rules of The Exchange as contained in Key Issue No. 5 (Annual Accounts Procedures), which states that audited annual accounts of companies ought to be submitted within three months of year end." The Exchange also said that the capital market and the investing public need timely financial information from listed companies in other to facilitate stock transactions that are based on market fundamentals. "This is essential for fair price discovery and investor confidence in our capital markets," it said.
Some of the other companies on full suspension are: African Alliance Insurance, IPWA, Premier Paints, Omatek Ventures, Daar Communications, MTI, Nigerian Wire & Cable Industry, P.S.
Mandrides & Company, and Lennards. Some companies on technical suspension include: Costain West Africa, Premier Breweries, Hallmark Paper, G & Cappa,and Union Homes Savings & Loans.
In the mean time, Bismarck Rewane, managing director of Financial Derivatives Company Limited, a business consultancy firm, said the uncertainty surrounding the rescued banks issue is weighing down investor sentiment at the capital market.
Speaking recently at the monthly breakfast meeting of the Lagos Business School, Mr
Rewane said, "Institutional investors remain cautious as they await signals that the market has completely bottomed out." He said for the Nigerian stock market to grow, "clear economic and market policies are needed."
Banks revocation
Meanwhile, the revocation of the operating licenses of Afribank, Spring Bank and BankPHB last Friday by the CBN might further affect the general confidence in the market.
The Central Bank revoked the operating licenses of the three banks because they have not shown capacity and ability to recapitalise before the September 30 deadline.
Addressing journalists in Lagos on Friday, Managing Director of the Nigeria Deposit Insurance Corporation (NDIC), Umaru Ibrahim, said the assets and liabilities of the three affected banks had been transferred to Bridge Banks effective August 5, 2011. The Bridge Banks are MainStreet Bank Limited, Keystone Bank Limited and Enterprise Bank Limited.
Under the new arrangement, MainStreet Bank Limited takes over the assets and liabilities of Afribank; Keystone Bank Limited assumes the assets and liabilities of Bank PHB while Enterprise Bank Limited takes over that of Spring Bank.
Mr Ibrahim explained that the Bridge Banks are being run by the NDIC as growing concern, adding that the managements of the affected banks appointed by the CBN in 2009 have ceased to be working for the apex bank and the respective banks.
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