Negative sentiment trails Nigerian equities amid economy contraction

Amid a negative take-off to trade this week, sentiments about Nigerian equities tilted further in favour of the bears as stock investors shifted focus to recent economic woes.

Equity investors at the Nigerian Stock Exchange (NSE) had walked cautiously and traded on the side-line at Customs Street ahead of yesterday’s official release of key domestic macro numbers by the National Bureau of Statistics (NBS).

Nigeria’s economic recovery is lagging behind even as mild rebound in crude prices is failing to boost the nation’s currency as petro-dollar revenue declines.

After a two-week delay by the NBS in releasing the all important Gross Domestic Product (GDP) growth data for the second-quarter, Nigeria headed for a record lowest deep in GDP posted by the country in 25 years after the negative growth of -0.36 percent in the first-quarter.

A further dip to minus 2 percent in Q2 GDP officially puts Nigeria in recession even as inflation rate continues to worry investors in equities as well as other Nigerian asset classes.

Though, the nations may witness better months in the remaining part of the year in terms of oil revenue on the heels of Nigerian militant group which said it has ended attacks on the nation’s oil and gas industry that have reduced the OPEC member’s output by 700,000 barrels per day (bpd) to 1.56 million bpd.

Oil futures had risen early this week supported by production suspensions in the U.S. Gulf due to an expected tropical storm and speculation that producers meeting in Algeria next month will act to prop up prices.

 “We expect activities in the equities market to be mixed this week but more towards the bears, with investors gaze likely to be fixated on the key domestic macro numbers”, according to research analysts at Lagos-based United Capital plc.

The NSE All-Share Index depreciated by 0.72percent to close last week at 27,450.91 points while equities market capitalisation declined to N9.428 trillion.

Further compounding equities market woes is the profit-booking seen in some Financial Services stocks on the back of recent TSA compliance-related sanction on some lenders by the Central Bank of Nigeria (CBN) – a development which leads to price losses.

“Going into this week, key data releases (including second-quarter (Q2) GDP and July Inflation) by the NBS should dictate the NSE ASI direction,” according to research analysts at Vetiva Capital Management Limited.

Report from the Nigerian Stock Exchange (NSE) for the trading week to August 26, 2016 shows that the stock market recorded a turnover of 1.124 billion shares worth N13.8billion in 15,625 deals in contrast to a total of 1.375 billion shares valued at N12.94billion that exchanged hands the preceding trading week in 16,915 deals.

The Financial Services Industry (measured by volume) led last week activity chart with 922.14million shares valued at N7.73billion traded in 9,612 deals; thus contributing 82.07percent and 55.92percent to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 113.395 million shares worth N4.68billion in 2,689 deals; while Conglomerates recorded a turnover of 42.98million shares worth N60.76 million in 610 deals.

Trading in the top three equities – Guaranty Trust Bank Plc, FBN Holdings Plc and Diamond Bank Plc (measured by volume) accounted for 434.97million shares worth N5.23billion in 3,490 deals, contributing 38.71percent and 37.84percent to the total equity turnover volume and value respectively.

Also traded during the review week were a total of 16,397 units of Exchange Traded Products (ETPs) valued at N1.961million  executed in 37 deals, compared with a total of 57,828 units valued at N766,162.96 transacted the preceding week in 37 deals.

A total of 1,650 units of Federal Government Bonds valued at N1.690 million were traded in 3 deals compared to a total of 3,127 units of Federal Government Bonds valued at N3.057 million transacted the preceding trading week in 6 deals.

Similarly, four other Indices finished lower during the week in review, with the exception of the NSE Main Board, NSE 30, NSE Banking, NSE Insurance, NSE Consumer Goods, NSE Oil and Gas and   NSE Pension indices that  rose by 1.93percent, 0.33percent, 0.86percent, 0.04percent, 0.93percent, 6.74percent and 1.21percent respectively while the NSE ASeM Index closed flat.

Twenty-seven (27) equities appreciated in price last week, higher than twenty-five (25) equities in the preceding week. Twenty-five (25) equities depreciated in price, lower than thirty-nine (39) equities in the preceding week, while 128 equities remained unchanged, higher than 116 equities recorded in the preceding trading week.