glendaewart39-blog - Tumblr blog

glendaewart39-blog · 6 years

Text

Stock Market Recovery Crystalises ~ Nigeria News > 25/01/2018

It is has now turn into incredibly obvious that the Nigerian equities market will close the year on a good note soon after three years of consecutive decline. The Nigerian stock market recorded its third consecutive decline in 2016 with the Nigerian Stock Exchange (NSE) All-Share Index (NSE ASI) falling six.17 per cent. Ahead of then, the market place had depreciated by 16.14 per cent in 2014 and 17.three in 2015.

Speaking on the 2016 functionality of the marketplace , the Chief Executive Officer of NSE, Mr. Oscar Onyema mentioned: "After peaking at 31,071.25 in June 2016, an increase of eight.48 per cent more than the 2015 closing worth, the NSE ASI began to retreat to damaging territory as total foreign inflow dropped 45 per cent involving June (N42.46 billion) and July (N23.43 billion) due to: loss of self-confidence in the implementation of an announced totally free floating foreign exchange (FX) regime weak corporate overall performance and second consecutive quarter of damaging economic development in the period resulting in the economy getting into into a recession."

Having said that, the market is set to record a good rebound and finish the year with a considerable jump. Currently, as at finish of November 30, the industry had recorded a growth of 41.2 per cent. This implies a monthly average appreciation of 3.7 per cent in the final 11 months. Marketplace analysts believe that with just 1 month to go, the marketplace can't record any decline that could wipe away the gains recorded so far. Hence, stakeholders are in celebration mood as they hope for a bountiful harvest at the end of 2017.

Optimism for Recovery Ideal from the beginning of the year, Onyema and numerous other stakeholders were optimistic that the marketplace will recover this year. According to the NSE boss, the capital industry is a subsector of the Nigerian economy and the World Bank had projected that the economy will recover from its recession in 2017 with a modest development of .six per cent. Onyema, therefore stated primarily based on the constructive forecast and the initiatives getting in spot by the NSE, investors need to be optimism about recovery of the industry in 2017.

He stated the Nigerian capital market will do a much better job at advertising its special worth proposition to each global and domestic investors. We count on investors to continue to maintain a close eye on the divergence involving the interbank FX price and other exchange prices in the nation. Accordingly, a convergence of FX rates in the nation and the functionality of listed corporates will decide the level of market place activity in the brief term," he stated.

Onyema disclosed that the NSE will take an adaptive strategy to method execution in 2017, noting that in the immediate future, the NSE will focus on achieving its purpose of becoming a a lot more agile and demutualised exchange and will quick track efforts towards establishing innovative items such as exchange traded derivatives to provide investors with tools to far better climate economic realities in 2017.

"We intend to strengthen our thought leadership efforts with policymakers to drive policies that will free of charge up the technique and promote the ease of carrying out company in Nigeria. We believe that incentive schemes for sectors of the economy that can help a pivot to export led economy will be advantageous and systematic removal of impediments to performing business enterprise and hence reduction of leakages will attract private sector investments," Onyema stated.

Analysts Bullish It was not only Onyema who was bullish on the future on the constructive efficiency of the industry this year, analysts at FSDH Study and Cordros Capital Limited had been equally convinced that the market would close in the green. They had stated that at the strong growth in the unaudited outcomes that quoted providers released for the period January - March 2017 and the improvement in the macroeconomic environment, we believe the equity industry is prepared for a recovery in 2017. The analysts explained that the raise in the provide of foreign exchange to meet the input specifications of manufacturing providers should really raise their production activities and revenue in the current financial year.

They stated data from the National Pension Commission (PenCom) on the allocation of the Pension Fund Assets as at February 2017 shows that the weight of the pension fund assets on domestic equity dropped consistently from 2014 to 2017, noting, having said that, that there are indications that there is space for pension fund assets to allocate additional funds to equities.

FSDH added that the worth of equity transactions from foreign and domestic investors declined involving 2014 and 2016, explaining that though the relative size of foreign investors’ participation in the equity industry declined involving 2014 and 2016, the share of foreign investors’ participation was greater than domestic investors’ participation involving 2014 and 2015. "The stability in the macroeconomic environment and the sturdy earnings of quoted providers must attract the required liquidity into the industry. Consequently, the equity industry must record a strong recovery in the year 2017," they stated.

In the exact same vein, analysts at Cordros Capital had stated the much better-than-anticipated Q1 benefits would bolster the market place to sustain constructive development in April. "We count on the present improvement - albeit modest - in the macroeconomic environment, specially the currency space, will additional stoke investor appetite, specifically in the event of no adverse surprise(s). Greater-than-expected 1st quarter outcomes (we expect a few top rated names to announce outcomes ahead of the finish of the month) might act as catalyst," they stated.

Forex window increase The significant issue that led to the rebound in the market place was the introduction of Investors’ & Exporters’ (I&E) FX widow by the Central Bank of Nigeria (CBN) in April. Commenting on the new policy, analysts Cordros Capital Restricted mentioned they sensed enhanced investor appetite for risk assets on the Nigerian bourse, judging by market place activity and the spike in the number of offers and the volume of shares traded shortly right after the introduction of the policy. They linked the functionality to lowered apprehension in the macroeconomic environment, impressive complete year 2016 and 2017 1st quarter (Q1) final results of hugely capitalised providers, as well as increased self-confidence and liquidity in the forex market.

Speaking in the identical vein, analysts at Afrinvest mentioned foreign investors’ appetite for Nigerian assets had waned substantially on the back of the currency crisis, which in turn had fundamentally weakened macroeconomic environment, dragged corporate earnings, and impacted negatively on the equities industry. "However, in April, investor sentiment strengthened following the commencement of I&E FX window which signalled a probable return of flexibility in forex price determination, although multiplicity of rates at the official window is nevertheless a concern.

Counting the gains The industry rally that has led to a gain of 41.two per cent year-to-date, has also impacted positively on lots of stocks. Some of the providers have fetch investors a capital acquire of over one hundred per cent. For instance, Fidson Healthcare Plc has recorded a achieve of 196 per cent as at finish of November 30, 2017. Dangote Sugar Refinery Plc chalked up 195 per cent. Might & Baker Plc has appreciated by 183 per cent, even though Stanbic IBTC Holdings Plc garnered 183 per cent.

C & I Leasing Plc have also witnessed capital development of 168 per cent, when Fidelity Bank Plc has posted 145 per cent gains. Dangote Flour Mills Plc and United Bank for Africa Plc recorded 142 per cent and 122 per cent respectively.

Other major gainers contain: Newrest ASL(138 per cent) Cement Firm of Northern Nigeria (97 per cent)NASCON Allied Industries Plc (87 per cent)Flour Mills of Nigeria Plc (81 per cent) GTBank Plc (74 per cent)Zenith Bank Plc, Beta Glass Plc (69 per cent apiece) Okomu Oil Palm Plc (67 per cent) Presco Plc (64 per cent) Nestle Nigeria Plc (62 per cent).

Sustaining the rally Though the market place will close the year on constructive note, some marketplace stakeholders have suggested methods to sustain the rally going forward. According to them, enforcing rules that re-assure investors of the security of their investments and by implementing some initiatives that had been introduced but abandoned, would aid to sustain the rally.

An investor, Mr. Moses Igbrude of Independent Shareholders Association of Nigeria (ISAN), stated apart from retail investors, many institutional investors and pension funds have remained wary of the industry, and for excellent purpose. "The expertise of a extreme industry decline in 2008/09 is still fresh in lots of portfolios. As the biggest base of institutional funds to deploy, they are a considerable resource for the sustenance of the market place. Having said that, they would have to have the self-assurance from regulators and operators that security checks are in place and rules will be enforced to assure that pensioners assets are not taking undue threat," Igbrude stated.

Also, a stockbroker noted that revisiting the introduction of short selling and security lending will assist. According to the broker, the industry has often viewed as introduction of shorting and securities lending.

"These two goods are a crucial hedge that pension funds can turn to in building earnings streams for their portfolios and limiting downside risk for the equity portion of their exposure. Also, as portion of efforts to address the effects of unsupervised margin activity in 2008, the Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC) issued margin suggestions in 2010 with the SEC basically issuing a margin list on June 14, 2013. Sadly not substantially has been heard of these two notable initiatives," he said.

The broker added that the concern of market place makers that was introduced by the NSE some years back. The NSE had introduced its market classifications and also its basket of securities for market makers. But there was no stick to via and these two initiatives have complimenting ties to the actions taken by CBN/SEC to ring fence the universe for participation in the market place.

0 notes