Investors jittery as losses rise to N1.31tr

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InvestorsMany investors are in jitters as sustained losses depressed the share prices of most quoted companies to their lowest values in more than a year.

They suffered net capital depreciation of N315 billion last week, pushing the net average losses so far this year to N1.31 trillion.

Benchmark index at the Nigerian Stock Exchange (NSE) indicated average year-to-date return of -11.17 per cent, 139.7 per cent increase on average decline of -4.66 per cent recorded by the first half of the year ended June 30. The stock market had traded negative in six of the seven past trading sessions, causing panicky investors to invoke open market orders and dump stocks at lower prices.

Checks at the weekend showed that most quoted companies are hitting new one-year low or trading around their lowest prices in the past one year. Several sectoral leaders, including Okomu Oil Palm, Presco, UAC of Nigeria, Julius Berger Nigeria, Stanbic IBTC Holdings, CAP, Total Nigeria, Transcorp Hotels, Nigerian Aviation Handling Company and PZ Cussons Nigeria closed at 52-week lowest prices. Other active stocks on the low included UACN Property Development Company, Eterna and MRS Oil Nigeria.

Despite the onset of the first-half earnings season, several large-cap and mid-cap stocks also closed around their lowest prices in a year, including NSE’s largest capitalised stock, Dangote Cement Plc and most capitalised financial institution, Guaranty Trust Bank.

Market-leading stocks around their one-year low included Zenith Bank, FBN Holdings, United Bank for Africa, Nestle Nigeria, Cadbury Nigeria, Transnational Corporation of Nigeria, Guinness Nigeria, Dangote Sugar Refinery, Flour Mills of Nigeria, Honeywell Flour Mills, Nascon Allied Industries, Fidelity Bank and United Capital.

The steep decline in shares prices among active large and mid-cap stocks had compounded the precarious market situation, which had seen about one-third of quoted companies stagnant around nominal values and unable to recover since the 2008 market crash.

The All Share Index (ASI)- the value-based benchmark index that tracks share prices at the NSE, declined by 2.27 per cent to close weekend at 27,919.50 points as against the week’s opening index of 28,566.79 points. Aggregate market value of all quoted equities also declined from the week’s opening value of N13.922 trillion to close weekend at N13.607 trillion.

The ASI had opened 2019 at 31,430.50 points, 17.81 per cent down from its 2018’s opening index of 38,243.19 points. Transactions at the NSE had dropped by 41.3 per cent to N937.8 billion in first half as investors rued macroeconomic uncertainties amid political risks and increased insecurity.

Total transactions at the Nigerian equities market stood at N937.79 billion during the first half of 2019, a decline of 41.3 per cent or N659 billion from N1.597 trillion recorded in the corresponding period of 2018. The performance in first half 2019 however represented a marginal increase of 0.27 per cent or N2.53 billion on N935.26 billion recorded in first half of 2017.

While most analysts agreed the current market situation presents good opportunity for long-term investors, most also remained cautious about the immediate to short-term outlook.

“In the coming week, we believe the bearish performance will be sustained despite attractive prices in fundamentally sound stocks as poor first half 2019 earnings results do little to spur investors’ interest,” Afrinvest Securities stated at the weekend.

Cordros Securities reiterated that its “outlook for equities in the short to medium term remains conservative, amidst the absence of any catalyst to drive positive market returns”.

The Association of Securities Dealing Houses of Nigeria (ASHON) at the weekend urged investors to shun panic and exercise restraint to avoid avoidable losses as the stock market would soon rebound.

ASHON also urged investors to take advantage of stockbrokers for sound professional advice before taking investment decision.

Reacting to continuing decline in share prices and massive sale of shares on the NSE, ASHON Chairman Chief Patrick Ezeagu described the situation as unnecessary panic sale. According to him many investors adopt herd instinct whereby they sell off just because others are selling.

Ezeagu noted that two investors may not necessarily have the same motive for sale or buy order, saying this is where the need for professional investment advice from stockbrokers become compelling.

He stated that a trend analysis of corporate earnings in recent time indicates that many companies across sectors have posted higher earnings with good returns but this has not significantly reflected in the upward movement of their share prices.

Ezeagu explained that there was nothing unusual about this as the market generally reflects the trend in the economy, hence, investors buy into the future of these companies on the expectation of higher shareholder value.

“Those who are selling off their shares right now are speculators and not real investors. Every stock market needs speculators for liquidity but they can change investment decision in one second.

“Our stock market is forward looking. Investors need not be nervous. They should consult professional stockbrokers for sound investment decision. There is no basis for panic sale of shares. Many companies have announced strong financial performance with prospects of increased future earnings. Why should a shareholder of such a company embark on panic sale of shares?

“Globally, stock market gauges the mood of the economy like a barometer. Our market is not a local one. Foreign investors have significant stakes because their analysis has always convinced them that our market has potential for strong Return on Investment (RoI).

“At the moment, core investors are awaiting a couple of things, including announcement of ministers and the Economic Team to show the clear direction of the government.

“These are issues that are beyond the board and management of the Exchange but have dire consequences on investment decisions. The bearish trend has to do with the fact that the government is yet to settle down after the elections. However, astute and professionally guided investors should take position now that most stocks are trading lower than their net realisable asset value and expect handsome returns when the market shall eventually rally.

“A mere study of most of the companys’ performance figures is most informative and points in the direction of a market that will definitely rally as soon as the economic team of government is in place,” Ezeagu said.

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