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Nigerian Stocks have been steadily selling off since a January 19 peak as investors took profits on small capitalised banking stocks which lead the market in gains earlier in the year.
The market which touched as high as 45,000 points as at Jan 19 this year has dipped about 12.8 percent since to 39,323 points on Friday 25th May 2018 after shares in banking and consumer goods companies declined.
The market capitalisation of listed firms also saw a 13 percent decline to N13.5 trillion from N15.5 trillion in January.
At the time of the peak, the best 10 performing stocks were mainly dominated by the banking sector with seven Tier 2 lenders making the 7 top performing stocks list just 19 days into the year, according to data compiled by BusinessDay.
Skye bank was the best performer at the peak in January, recording a year to date (YTD) increase of 158 percent, followed by Diamond Bank with a YTD increase of 138 percent, and FCMB up 135.81percent.
Unity Bank was also up by 130.19 percent, Wema bank up 125 percent, and Sterling Bank up 112.04 percent.
While Jaiz bank, Cement Company of North Nigeria (CCNN), Caverton offshore support Group PLC and Transnational Corporation of Nigeria, completed the top ten best performing stock list as at January 19, with 85.71 percent, 84.21 percent, 72.09 percent and 71.23 percent gains respectively.
At the early days of 2018, BusinessDay trend analysis also reveals that firms with small market capitalization (below N100 billion) took an early lead, outperforming their counterparts with large market cap.
“When investors are looking out for where market opportunities are, they look out for sectors that haven’t done well but can grow, they realign their portfolio from the highly capitalized stocks to low capitalized stock that has growth potentials,” Ayo Akinwunmi, Head of research FSDH merchant bank said.
However, as at the close of the trading on Friday 25th May 2018, investors had largely sold small cap bank stocks that were the market leaders in January.
The top 10 performing stocks today shows companies from different sectors with Cement Company of Northern Nigeria taking the first spot with a share price that has risen 152.63 percent.
Caverton Offshore group Plc followed with a share price that has rallied some 82.17 percent, Unity bank, Beta glass Co and Fidson stood 3rd, 4th and 5th with a year to date share price gains of 75.47 percent, 70.24 percent and 60.81 percent respectively.
NPF Microfinance bank, N.E.M insurance company Learn Africa PLC, Cutix PLC, and FCMB completed the top 10 spot with share price up some 54.40 percent, 54.22 percent, 50 percent, 49.25 percent and 48. 60 percent respectively.
“The decline in market activity has come amid cooling market sentiment and increased risk aversion after the initial January rally (market closed 16percent higher in January) and ahead of the 2019 elections,” said equity research analysts at Lagos-based Vetiva Capital.
“We do not expect trading activity to pick up significantly in the near-term as investors continue to monitor political developments,” the analysts added.
The stocks that underperformed the Nigerian Stock Exchange (NSEASI) and recorded over 20 percent decline this year are: African Alliance Insurance Company Plc (-60percent); Cadbury Nigeria Plc (-20.2percent); Cornerstone Insurance Plc (-30percent); Dangote Flour Mills Plc (-26.7percent); Courteville Business Solutions Plc (-60percent); DN Tyre & Rubber Plc (-38percent); Equity Assurance Plc (-58percent); and Fidelity Bank Plc (-22.8percent).
Other stocks that have laggard this year are: FTN Cocoa Processors Plc (-60percent); Guinea Insurance Plc (-20percent); Consolidated Hallmark Insurance Plc (-40percent); Japaul Oil Plc (-52percent); Lasaco Assurance Plc (-22percent); Mutual Benefits Assurance Plc (-30percent); Multi-Trex Integrated Foods Plc (-20percent); and Niger Insurance Plc (-50percent).
Also, Regency Alliance Insurance Company Plc lost 48percent since this year; Royal Exchange Plc (-32percent); Sovereign Trust Insurance Plc (-48percent); Tantalizers Plc (-26percent); UAC Property Development Company Plc (-23.3percent); Union Bank Plc (-21.8percent); Unic Insurance Plc (-60percent); and Veritas Kapital Assurance Plc (-32percent).
A clear look at the price list shows majority of them are insurance stocks which hitherto were warehoused at 50kobo per share, but became worse-off after the Nigerian Stock Exchange (NSE) implemented the rules on par value and share price methodology.
Earlier this year, the price floor for listed companies was 50kobo, but with the implementation of the Par Value Rule the price floor became one kobo. Currently, the price of every share listed on the Exchange is determined by the market, except that no share trades below a price floor of one kobo.
Stock traders expect to see mixed performance to continue, but mostly in favour of the bears as investors price-in pre-election year risks.
“We strongly advise investors to take a keen interest on firms’ fundamentals before taking an investment position. We equally advise on taking a medium-long term view of the market,”said GTI Research in their May 1 note to investors.
Bismarck J. Rewane, managing director/CEO, Financial Derivatives Company Limited said at LBS Executive Breakfast Meeting that “stock market performance will flatten out” in May; adding that with Q1 results having little impact on the bourse, bargain hunting on stocks will drive market performance.
IHEANYI NWACHUKWU & MICHEAL ANI
